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More Sick Leave on the Horizon

By Michael O'Flaherty

More Sick Leave on the Horizon

Did you know that from 24th July 2021 sick leave entitlement increases from 5 to 10 days a year? Whether you’re an employee or employer, here’s some things you should know.

The Holidays (Increasing Sick Leave) Amendment Act 2021 will come into force in New Zealand on 24 July 2021. Much has been written about the perceived benefits and detriments of the changes, with some stating that it will be costly for businesses, while others do not believe it goes far enough.

Increase in minimum sick leave entitlement

The first thing to note is that the legislation increases the minimum employee sick leave entitlement under the Holidays Act 2003 from 5 days to 10 days in the qualifying 12 month period. Currently employees become entitled to sick leave upon completion of six months continuous employment with an employer. There is a potential change to this in the near future with discussion of reducing or removing the six month stand-down period (expanded on below).

Sick leave may be taken in advance with the employer’s agreement, or the six month stand-down may be explicitly waived in the employment agreement. Employers do not need to vary an employee’s employment agreement for the increase of sick leave entitlement to take effect as it will automatically apply, but they should update their standard agreement for any new employees.


When does the increase in entitlement take effect for employees?

From the employee’s next entitlement date, following the Act coming into force. The new Act will come into force on 24 July 2021 so an employee will be entitled to ten days sick leave on their next entitlement date after that date. Once the Bill has been law for 12 months every employee will have become entitled to the full 10 days on their entitlement anniversary date.

For example, an employee that started employment on 1 January 2021 will be first entitled to sick leave on 1 July 2021, following the completion of six months continuous employment. This entitlement will be 5 days sick leave for the next 12 month period as the new Act will not be in force on that date. They will first receive their 10 days sick leave entitlement on 1 July 2022. In contrast, an employee starting on 1 February 2021 will first be entitled to sick leave on 1 August 2021, which will be the full 10 days sick leave entitlement.


No change to maximum sick leave entitlement

There is no change to the maximum sick leave entitlement under the Holidays Act. The maximum will remain 20 days in any 12 month period. Under the existing legislation employees can carry over up to 15 days’ sick leave on each entitlement anniversary date. This will reduce to 10 days’ sick leave under the new Act to ensure the limit remains 20 days. In essence there is no change to the benefit for employees as they will still be capped at a maximum of 20 days’ per 12 months, and for employers they have certainty that the maximum liability will remain as is.

It may be that an employment agreement already provides for the employee to carry over more than 20 days’ entitlement (many Collective Agreements do not specify a limit). The new Act will not vary these employment agreements.

 

Continued sick leave provisions

There are no changes to any other aspects of sick leave. As a reminder, those aspects include:

  • If an employee becomes sick or injured, or their spouse, partner or dependent becomes sick or injured while on annual holidays leave, their employer may allow the employee to take sick leave rather than annual holidays leave.
  • If the employee becomes sick or injured, or their spouse, partner or dependent becomes sick or injured before taking annual holidays leave, their employer must allow the employee to take any period of sickness or injury that they would have taken as annual holidays leave as sick leave.
  • An employee who intends to take sick leave must notify the employer as early as possible before the employee is due to start work, or if that is not practicable, as early as possible after that time.
  • Sick leave is not an entitlement that must be paid out to an employee at the end of an employment relationship.
  • An employer may require an employee to produce proof of sickness or injury if the employee has been absent on sick leave for 3 or more consecutive calendar days (it does not matter if that day would have been a working day for the employee). The default position is that this will be at the employee’s cost unless specified in the employment agreement. In addition to this, the employer may require proof within the 3 consecutive calendar days provided they meet the reasonable costs of obtaining proof and inform the employee as early as possible that the proof is required.

This last point is also a source of controversy and may be subject to change on the horizon. For employers, it enables them to require evidence of illness or injury immediately if they suspect the employee’s reason for leave is not genuine. For employees, it can be quite difficult to comply with as there is no guarantee that their normal medical centre can provide an appointment time within 24 hours.

If you're having challenges managing sick leave, find out more here in a further article: Sick Leave Issues.
 

Further potential sick leave changes

The Holidays Act Taskforce has made a number of recommendations on changes to leave entitlements, payment calculation and interaction of Parental Leave with annual holidays. One of the recommendations is to make sick leave available from day one of employment, removing the six-month continuous employment test. New employees would accrue an additional day per month, from the anniversary date of their employment until their full entitlement for that year had been reached. There are a number of further considerations for this in practice, including what happens for existing employees, and whether there is a cap of 10 days in any one year.

A further recommendation relating to sick leave is that employees should have the ability to take sick leave in units of less than a day on a proportionate basis for time and pay with a minimum amount of a quarter of a day. The basis for this is to remove potential disadvantage to employees who work half a day and then take sick leave for the balance of the day only to find that the part day of sick leave counts as one day of their entitlement.

The expectation is that legislation will be introduced in early 2022 to address the recommendations of the Taskforce.

 

If this article has raised any questions for you, we’d love to help you answer them.

Michael O’Flaherty

Associate, Wellington

Phone: +64 4 916 7494

Email: michael.oflaherty@gibsonsheat.com



Disclaimer: The information contained here is of a general nature and should be used as a guide only. Any reference to law is to New Zealand law and legislation. We recommend before acting on it, you consult your accountant or tax adviser.

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