The long awaited Holidays Act Taskforce report has finally surfaced, aimed at addressing the current confusing regime which has led to a plethora of complexities and errors when dealing with holidays. In a promising sign for employees and employers alike, the Government has accepted all its 22 recommendations, with legislation anticipated early next year.

There are a range of significant adjustments for employers to consider. These include:

• Entitlements that currently do not arise until after 6 months of employment will be accessible from the first day, including sickness, bereavement and family violence leave.
• Gross earnings for holiday payment calculations will include all cash payments received (whether contractual or discretionary).
• The current parental leave ‘override’ will be removed, so employees returning to work after parental leave will be paid at their full rate for annual holidays.
• On the sale or transfer of a business, employees will have a choice about whether they transfer their leave entitlements to the new employer or have it paid out and reset;
• Requiring payslips, so employees know what their used and remaining leave entitlements are, and how they were calculated.

The full list of the recommendations can be found within the report, which is publicly available on the MBIE website.

While these changes should mean a simpler and more certain holiday system, the trade-off in some areas is higher employee entitlements. And while ultimately the new regime may be easier for employers to operate, initially there will be a period of significant change. Businesses will have considerable preparation work to manage, and proactive engagement on the payroll and policy implications will be essential.

Please feel free to get in touch if you need any assistance or advice on the proposed changes.