How to make sick pay and holiday pay more equitable

Newsroom

6 hours ago

Analysis: As the Government reviews the Holidays Act, we would urge them to consider how they could build more equity in their approach to sick pay and public holidays.
Currently each employee in Aotearoa New Zealand receives 10 days of sick pay per year once they have been working for their organisation for six months, up to a maximum accrual of 20 days. Some organisations offer more days per year or longer accruals or both, as part of their enhanced benefits.
The draft bill proposes shifting from an annual entitlement to an accruals system, using pro-rata pay, but this could go further.
Positively, accruing paid sick leave on a pro-rata basis from the day we started our first job makes access to paid leave more immediate.
If we add to this removal of a maximum accumulation and manage it in a centralised government system (a little like ACC but with individual accrual) transferrable between jobs, we could create more equity in the sick pay system for employees and employers. This could be managed in the IRD system.
When an employee changes job, their accrued sick leave moves with them, and while the dollar value may not equate directly if they move to a higher earning job it is still better than beginning accrual again.
Regardless of how many hours or days a week a person works, currently everybody receives 10 days annually from each job they work.
A part-time employee may also be working more than one job and so could technically have double or triple the number of sick days a full-time worker has. Though this probably only occurs in a minority of cases, it does create inequity in the system. Accrual based on hours worked can negate this anomaly.
By creating a system where sick leave is centralised, it puts employers on an even playing field. All employers pay the pro-rata amount in their pay runs per employee into the employee's centralised pot, rather than only paying when an employee is sick. Employees would earn their sick leave not at 10 days a year, but at a percentage of their pay equivalent to 10 days per year (about 4 percent).
Imagine taking this a step further and enabling families to combine sick pay, so that employees can better balance the workload when there is a need to care for a child or an older person.
Therefore, all employers contribute to sick pay, whether their employees are sick or not, which may decrease indirect discrimination. This potentially takes pressure off employers when people are sick for longer as their pay is already accrued.
We know that sometimes employees see their sick leave as an extension of their annual leave, but unlimited accrual and the associated benefits of being able to have paid leave if you are sick for an extended period could discourage this thinking.
Similarly, some employers may discourage their employees from taking sick leave, particularly if this results in a direct replacement cost. Accrual can resolve this issue as it is paid from the employees' pot, not the employer's pocket.
The flipside is that employees may try to save their sick pay by not taking time off when they are sick, in case they are ever in a long-term sickness situation. This would have to be carefully managed.
Although discrimination based on characteristics such as gender or disability is illegal in New Zealand, we do know that indirect discrimination often occurs. People are not chosen for a role because they may cost their employer more in sick leave. This may help to negate this.
The current stand down of six months before being able to access sick pay means those more likely to change jobs, who are also often more vulnerable workers, have less access and a higher likelihood of it being reset. Some employees may experience multiple points in time where they do not have access to sick pay.
Part-time workers are more likely to change jobs and have precarious employment. This means that although they might technically have access to more paid sick in the current model, they may not get the opportunity to use it.
In terms of public holidays, these are currently given to an employee who works on the day on which they fall. Although in theory this makes sense when we look at a standard 8.30am to 5pm, Monday to Friday working week, it can also create unfairness.
A classic example is a full-time hairdresser who traditionally works Tuesday to Saturday, missing out on five of our 12 public holidays in 2024, essentially getting five fewer paid days off work a year.
'Mondayisation' has privileged those who work traditional working weeks. So how can we address this in the Holidays Act reform?
I propose that public holidays should also be pro-rated. Therefore, if you work five days a week you would receive 12 public holidays a year. Someone who works two days a week would receive two fifths of their public holidays per year, or four days.
This would be added to annual leave, but they would still be expected to take each public holiday they work off, and use annual leave if needed. Although this might feel unfair to a person who works part-time on a Monday, it puts more fairness in the system.