Speech to Employers and Manufacturers Association on The Holidays Act

  • Laila Harré

Good morning, and thank you for the invitation to address your conference today.

It's very timely that you have asked me to speak on the Holidays Act, as the Labour Alliance coalition is embarking on a review of minimum employment standards of which the Holidays Act is a focus.

Before I go into detail on this process, I would like to take a step back and go over some of the history of the Act, and outline why the coalition partners have earmarked its modernisation as a priority in our industrial relations work programme.


The Holidays Act 1981 is based on a consolidation of the Annual Holidays Act 1944, Public Holidays Act 1955 and part of the Factories Act 1946. Over time many issues have arisen relating to the interpretation of and application of the Act, and as a result it has been subject to a number of reviews over the years.

In 1993 a technical review was held with the proviso that actual holiday entitlements would not be affected. During this review, it became clear that to effectively address a number of issues the application of entitlements would have to be considered.

As a result a substantive review was held in 1995. This review involved tripartite discussions between the then government, the New Zealand Council of Trade Unions and the New Zealand Employers Federation. Parties to the discussion were unable to agree on a total package, and as a result the then Minister of Labour announced that the review would be deferred due to the lack of consensus.

As many of you here today will know, this was a highly charged issue where a drive to reduce entitlements or trade them has prevented the long overdue tidy-up of the Act.

The most recent and controversial review was conducted by the National-New Zealand First coalition over 1997/1998. The main issue considered was the degree to which holidays, namely statutory holidays and annual leave could be traded for cash.

At the time, this was justified as a way to increase the flexibility of holiday entitlements. The process was viewed, including by the current coalition partners, as a thinly veiled effort to reduce entitlements. The consultation failed to show how a genuinely voluntary system could operate. If nothing else the process should have reminded people how precious legislated minimum standards are to New Zealanders generally.

The four options presented in that review were:

* Public holidays tradeable for cash

* One week's annual holidays tradeable for cash

* Public holiday's and one week's annual leave for cash

* No tradability for cash and a technical tidy-up of the Act

In the six-week consultation process more than 13,000 submissions – including 67% of unique submissions - were received in favour of the last option – no tradability for cash and a technical tidy-up of the present Act.

The second most favoured option – backed by 18% of unique submissions – was to make public holidays tradable for cash. This was the option most favoured by employers and employer's organisations. Reasons given for backing this option included the need for flexibility in relation to public holidays and the need to preserve leave for annual holidays.

This and previous consultations did however identify a number of technical issues that have cause problems with the existing Act.

For example, the lack of clarity throughout the statute including the complexity of its provisions. This has made if difficult for both employers and employees to establish their rights and obligations in respect to holiday entitlements.

This has left much up to the court's interpretation, with the result that much of the law rather than being clearly expressed in the statute.

Things like Anzac and Waitangi Day being treated differently than other public holidays, payment for public holidays, rules for shiftworkers and the way annual holidays are paid out.

Unfortunately the Minister of Labour at the time refused to introduce the tidy-up legislation around which a consensus could be developed unless opposition parties were prepared to agree to tradeability despite the failure of the consultation process to support it.

Review of Minimum Employment Standards

Last week, cabinet agreed that the review of the minimum employment standards should start with three advisory groups undertaking a review of the Holidays Act, a review of measures to promote Equal Employment Opportunities, and consideration of ways to protect employees affected by the sale or transfer of a business or contracting out.

The function of the advisory groups will be to determine what information is needed for decision-making, request the Department of Labour to undertake any research needed, to assess options to address problems identified by research and make recommendations on policy options and their likely implications.

Nominations are currently being sought for the three advisory groups, and it is anticipated that Labour Minister Margaret Wilson will announce their final form by the end of November. We would like the advisory groups to meet before Christmas to confirm terms of reference and start designing a work programme for approval by the Minister of Labour.

More specifically, the Holidays Act advisory group will advise the government on the current situation and possible future policy options for amending the Act to ensure it meets the following criteria.

* Accommodates increased diversity in working patterns.
* Ensures the needs of employers and employees are balanced with a view to increasing productivity
* Takes into account the manifesto statements of both Labour and the Alliance in relation to the Holiday's Act

It's not the government's intention to use the minimum code to set a new gold standard in holidays or any other area. Our approach is to look at benchmarking all entitlements against prevailing standards. Unless there is a good reason to do otherwise, such as tackling structural discrimination against women, then minimum standards should generally follow the market rather than create it.

Labour and Alliance policies on holiday entitlements

On this basis the Alliance supports four weeks annual leave and the proposed technical or tidy-up amendments to the Bill.

The Alliance believes that New Zealand workers are experiencing the twin problems of over-work and under-employment, and sees four weeks annual leave as a constructive solution to both of these problems. It creates more jobs because some businesses will hire more staff to cover the holidays of existing staff.

A survey carried out prior to the last election showed that 54% of employers support an increase in annual leave to four weeks. Annual holidays were last extended in 1974, when the minimum entitlement was raised from two weeks to three, and employment opportunities were not jeopardised as a result.

While many workers already receive four weeks annual holidays, setting this as a minimum standard will ensure that employees with the least bargaining power qualify as of right.

Labour's policy is for annual leave to be cumulative to a specified maximum extent to a level yet to be determined.

The Alliance wants 11 paid public holidays, not be transferable, and minimum pay rates guaranteed for working on public holidays with a day in lieu.

Labour favours 11 public holidays for fulltime employees, with an appropriate portion of the entitlement for part-timers and minimum overtime payment plus a day in lieu for working a public holiday.

Paid Parental Leave

I notice that Paid Parental Leave is one item up for discussion on today's agenda. To aid this discussion, I would like to bring you up to date with progress towards a government position on Paid Parental Leave.

Talks are continuing between myself and Margaret Wilson on how the coalition partners' pre-election policies can be incorporated into a comprehensive government policy. At the moment no options have been ruled in or out, but we have a more realistic idea of the possible funding mixes and costing options open to us.

Above all, we have to decide on how best to fund a Paid Parental Leave scheme that gives new parents a decent level of income while they take time off after the birth of a child. Much has been made of whether employers should contribute towards ensuring the health, wellbeing and retention of key employees. In this respect, I consider parental leave no different to annual holidays.

To tackle some of the myths around the possible cost to employers, I would like to talk you through some of the more up to date and accurate figures.

If money set aside in the budget for the Parental Tax Credit scheme is diverted to Paid Parental Leave, the possible cost to employers is greatly reduced.

In the 2000/2001 budget $21m was earmarked for Parental Tax Credits. If this is diverted into Paid Parental Leave the gross cost of PPL - with a cap of the average male wage of $761 - $80m. Of this sum, the net cost to employers is estimated at $51m, a figure that takes into account the savings associated with improved staff retention when women return to work when they wouldn't have otherwise done so.

This figure is for 12 weeks at 80% of employee's wage, and broken down, the gross cost equates to a payroll levy of 19c per $100.

I hope this information, both on the Holidays Act and Paid Parental Leave, provides food for thought for your discussions today. I look forward to your ongoing input into the redesign of New Zealand's industrial relations laws, and wish you well for the rest of your conference.

Thank you.