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Understanding and respecting your employees’ rights will help you develop long lasting relationships with your employees. You will also earn recognition as a fair employer in the New Zealand labour market. One of the most important rights for employees is having adequate access to leave. This assists in balancing employee’s work load and life commitments. In addition to avoiding potential disputes, allowing your employees to take time off work when they need it is essential to promote balance and enhance productivity in your workplace. This article will provide a breakdown of some of your essential obligations and rights as an employer when dealing with annual and parental leave entitlements. 

Annual Leave: Your Employer Obligations 

What Is Annual Leave?

Annual leave, also known as annual holidays, is a benefit that you have to offer to your employees by law. Annual leave is paid time off work every year to use as the employee wishes. Allowing your employees to recharge is essential to promote good physical and mental health. This, in turn, increases productivity.

Who Is Eligible To Receive Annual Leave?

All your employees are entitled to take paid time off for annual leave. This is even if they work part-time or irregular hours, with the exception of self-employed workers. 

How Much Annual Leave Can Your Employees Take?

Your employees are entitled to take at least four weeks’ paid annual leave every year (not including public holidays or sick leave) after they have worked for you for at least twelve uninterrupted months. To calculate their entitlement, you must consider whether they work regular hours, shifts or have no set hours.

For example, if an employee works two full days each week of the year, they are entitled to eight paid days in a year. The Employment New Zealand website lists other instances of predictable and unpredictable work patterns.

If your employee does not have set hours, you can decide with them what their annual leave looks like. You can then record this in their employment agreement. If your employee is on a fixed-term contract of less than 12 months, or works intermittently, you may agree to pay him holiday pay at a rate of not less than 8% of their gross earnings.

However, if your employee has worked for you for less than twelve months, you must:

  • pay them holiday pay and deduct any annual leave they have taken in advance (note you can allow your employees to take annual leave in advance to cover days they would otherwise be working during the closedown); and
  • change the date they become entitled to annual leave to one year on from the start of the holiday period.

How to Calculate Annual Holiday Pay

When calculating how much to pay your employees, you have to use the higher of their:

  • ordinary weekly pay at the time of the leave; or
  • average weekly earnings over the previous twelve months.

If your payroll system records annual leave in hours, you should keep a record of your employees’ leave balances in weeks as stated in the legislation. This is particularly important if your staff works highly variable hours and days or do not have regular work patterns, as it will save you time having to convert hours to weeks to demonstrate compliance.

What Are Your Employer Obligations?

In addition to giving your employees at least four weeks of paid annual holidays, either in full or building up throughout the year, you have other obligations including:

  • allowing your employees to take at least two weeks at once if they request it;
  • considering any request to pay out up to one week of their annual holiday entitlement. This is unless your policies do not allow cash up;
  • keeping accurate records of your employees’ leave balances; and
  • giving employees at least fourteen days’ notice before an annual closedown, or if you require them to take annual holidays.

As an employer, you also have certain rights, which include:

  • the ability to set limits on how much leave your employees can carry over each year;
  • asking an employee to use some of their leave if they have accumulated a large leave balance;
  • allowing your employees to exchange up to a week of annual leave for cash each year if they want to; and
  • declining your employee’s request for leave if you have a good reason to do so.

This can change with changes in government regulation so please check the Employment New Zealand website for the most up to date information.

Parental Leave: Your Employer Obligations 

What Is Parental Leave?

Parental leave, also known as family or maternity leave, is one of the benefits available to New Zealand employees by law. It includes non-standard working arrangements such as casual, seasonal, temporary employees, fixed-term employees and self-employed people. 

Who Is Eligible to Receive Parental Leave?

To be eligible, your employees need to work for you for a minimum of ten hours a week, on average, for a period of at least six months. If they do not meet this requirement, but they satisfy the payment threshold test as the primary carer of the child, they can still receive government-funded parental leave payments if they apply for negotiated carer leave.

How Much Parental Leave Can Your Employees Take?

As at 1 July 2020, the minimum required parental leave in New Zealand has increased to 26 weeks. Eligible employees receive government-funded parental leave payments if they are the primary carer of a child. As the employer, you can top up these government payments to full pay.

Your employees are entitled to be away from work for a total of 52 weeks in a year, but only if they have worked for you for at least ten hours a week, on average, for twelve months or more (just before the expected birth of the child). Their entitlement reduces to 26 weeks if they have only worked for you between 6 and 12 months. If you need to work out whether your employees are eligible, you can use the Employment New Zealand’s parental leave tool

Parents can split their parental leave total entitlement between them, as long as they are both eligible. They can choose to commence their leave as early as six weeks before their child arrives, or earlier than this if:

  • you agree (as the employer);
  • their doctor or midwife directs so; or
  • they can no longer do their job safely or adequately.

What Are Your Employer Obligations?

You are required by law to assess your employees’ eligibility when they request parental leave, and: 

  • explain their parental leave entitlements;
  • approve or decline their request within 21 days; and 
  • confirm their leave arrangements in writing.

Do You Have to Hold Their Position Open?

Once you know how long your employee will be away for, you can hire someone on a fixed-term agreement or a contractor to cover for parental leave. You can decline to keep a position open only if:

  • your employee will be away for longer than four weeks;
  • you can prove the position is crucial to your business; and
  • you can prove it is not possible to find a short-term replacement for your employee.

This can change with changes in government regulation so please check the Employment New Zealand website for the most up to date information.

Key Takeaways 

As an employer, you are required by New Zealand law to provide four weeks paid annual leave to your employees. All employees are entitled to annual leave, with the exception of self-employed workers. Your employees are also entitled to parental leave if they have worked for you (for at least an average of ten hours a week) for longer than six months. As an employer, you are required to explain parental leave entitlements to your employees, approve or decline their request within 21 days and confirm their leave arrangements in writing. If you need help understanding your legal employment obligations or reviewing your leave balances, contact LegalVision’s employment lawyers on 0800 005 570 or fill out the form on this page.

FAQs

Does annual leave accrue while on maternity leave in New Zealand?

You have to accrue annual leave for your employees even if they take time off for parental leave. If your employee becomes entitled to annual holidays during parental leave or in the next twelve months after returning to work, you have to calculate their annual holidays pay at the rate of their average weekly earnings over the twelve months just before the end of the last pay period before the annual holiday is taken (with no comparison to ordinary weekly pay).

How is annual leave calculated in New Zealand?

Answer2You have to pay annual leave at the start of your employee’s holiday, at the rate of the greater of your employee’s ordinary weekly pay or average weekly earnings.

Do fathers get paid paternity leave in New Zealand?

In New Zealand, parents can split their parental leave total entitlement between them, as long as they are both eligible. Fathers can take up to two weeks’ unpaid leave at or about the time of birth or adoption.

How much are maternity leave payments in New Zealand?

Answer4When an employee takes parental leave, they receive government-funded payments for twenty-six weeks, at least the equivalent of ten hours a week at the minimum wage. Employees receive their ordinary pay up to a maximum of $606.46 a week before tax (as of 1 April 2020). Self-employed workers receive either a maximum payment to match their average earnings up to $606.46 a week before tax or a minimum payment of $189 a week before tax. Employees can apply online on the IRD website.

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