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Annual Holidays Payout

Published 07 Jul 2011

There has been significant confusion with the Holidays Amendment Act 2010 and the entitlement of employees to apply for up to 1 week’s Annual Holidays to be paid out and the employer’s entitlement to decline the request or to approve the request and to then pay it out.

The Labour Department has ruled (and published) employees who became entitled to 4 week’s annual holidays after the 1st April 2011 can apply now to their employer to be paid out up to 1 week’s annual holiday. If the employer agrees and approves the request, the employee will be paid out.

An employee starting work for an employer on the 2nd April 2010 would have become entitled to 4 week’s paid annual holidays on the 2nd April 2011 (the anniversary). The employee may apply for up to 1 week – or part thereof- to be paid during this entitlement year.

An employee who became entitled to 4 week’s annual holidays on the 31 March 2011 will have to wait for the next anniversary (31st March 2012) before applying.

The Act states that if the Employer has incorrectly paid out a portion of the employee’s annual holidays, where the employee did not make a request for payment, the employee’s entitlement to take that portion of the holidays remains in force – so the employer will have to pay twice.

Employer May Have A Policy Preventing Holiday Payout

Employers may have a policy that the employer does not have to consider an employee's request to have a portion of his or her annual holidays paid out. Employers are expected (but are not required by the Act) to consult their employees on the development of any policy preventing the payout of annual holidays and advise potential new employees of the policy before they accept an offer of employment.

This is intended to lower compliance costs for those businesses that are never able to or do not wish to agree to paying out annual holidays. It means that employers do not have to consider requests that they would never agree to and that they are up front with employees about their position on paying out annual holidays. It is not intended that a policy limiting the ability to pay out annual holidays can be extended to the taking of annual holidays as holidays away from work.

Policy Examples

Below are two suggested policies for employers who do not wish to pay out Annual Holidays and those employers not wanting to transfer Public Holidays

Part Payment of Annual Holidays Not Permitted

The employer has adopted a policy that does not permit the employee to make any request under section 28A of the Holidays Act 2000 for a portion of an employee's annual holidays to be paid out.

Transferring Whole of Public Holiday Not Permitted

The employer has a policy that does not allow the employee to request an agreement that would enable all or part of a public holiday being transferred under section 44A or 44B of the Holidays Act 2003