Know your rights: Annual leave entitlements
In an age when the lines between work and home are increasingly blurred by constant connectivity, the sanctity of annual leave is sacred.
It's a crucial component of work-life balance and a major way to safeguard our wellbeing and avoid stress. It's also a fundamental right protected by the law.
Nonetheless, many people overlook, misunderstand or underutilise their annual leave entitlements, which means they may be missing out on precious downtime or even dollars tied to accrued but untaken leave.
Jaenine Badenhorst, Employment Lawyer at Empower Law, says navigating the Holidays Act on your own is "no walk in the park" and it's not uncommon for employers to make unintentional mistakes.
"Human error still creeps in. There have been occasions where large, well-resourced employers have miscalculated annual leave entitlements for hundreds or even thousands of employees over several years, adding up to very large sums of money."
"When employees understand their annual leave entitlements, they can check and follow up on any anomalies."
Here’s what you need to know, legally, about your annual leave.
How much annual leave are you entitled to?
Annual leave entitlements differ depending on the nature of employment and are outlined by Employment New Zealand.
Permanent employees in New Zealand are entitled to four weeks of paid leave for each 12 months of continuous employment. The first entitlement becomes available on the day after the employee has completed their first 12 months of employment, explains Badenhorst.
"Four weeks is the minimum entitlement available to eligible employees under the law, but employees should also check their employment agreements to see if they have additional entitlements,” she adds.
Employees are entitled to be paid while on leave (unless they have used up their annual leave or have not yet become entitled), with the pay equal to Ordinary Weekly Pay (OWP) or Average Weekly Earnings (AWE), whichever is greater.
If an employee is working under a fixed-term agreement less than 12 months in duration or; their hours are so intermittent or irregular that it is not practical to give them four weeks of annual leave (for instance a casual employee), an employer can pay annual leave entitlement with the employees wages, though it must be identifiable as a separate component of their pay, says Badenhorst.
"This is known as 'pay-as-you-go' holiday pay and is 8% of the gross earnings for any particular pay period."
If employment ends before an employees next entitlement date, their employer must pay them 8% of their gross earnings for the 12 months immediately before their employment ends (less any annual leave taken in advance).
If employment ends before the employee completes 12-months of continuous employment, their employer must pay them 8% of their gross earnings earned while they were employed (less any annual leave taken in advance).
Are there rules around how and when you can take annual leave?
Annual leave should be taken at a time agreed between you and your employer.
Your employer must allow you to use your annual leave within 12 months of becoming entitled.
You are also entitled to take two weeks of your annual leave in one go.
You can ask your employer to take annual leave in advance (before you are entitled), but the employer does not have to agree, explains Badenhorst.
"If an employee is in deficit when they end their employment, they can be asked to repay the annual leave taken in advance, for instance as a deduction from their final pay."
She adds that you're entitled to ask for one week of your annual leave to be paid out in cash, and you can ask for two weeks of your annual leave to be taken in one go. An employer does not have to agree, and may also create a policy stating this in advance.
Can your manager reject your annual leave request?
Yes, but consent must not be unreasonably withheld, says Badenhorst.
"An employer can decline a request for up to annual leave if it does not suit the needs of the business, for instance if they do not have enough staff to provide cover."
Can you be forced to take annual leave?
Yes, but your employer should first try to negotiate an agreement with you on the timing, says Badenhorst.
"An employer can require an employee to take annual leave at a particular time by giving them 14 days’ notice."
An employer can also have a regular closedown period each year, where they can require their employees to take leave – even if they do not have annual leave entitlement available. A closedown period must be in the employment agreement, and the employer must give at least 4 days’ notice of the date if it changes from year to year.
What happens to untaken annual leave?
Untaken annual leave simply rolls over. If you end your employment, your annual leave will be paid out in cash.
Can you be dismissed while you're on annual leave?
Theoretically, this is possible though unlikely, says Badenhorst.
"It will be unusual to get dismissed while on annual leave, because an employer must have a good reason to dismiss an employee and must have followed a fair process before making the decision."
Can you be asked to work during your annual leave?
If the employer wants you to work during your annual leave, you can decline.
However, if you agree to work, you should ask for that time to be credited back to your annual leave entitlement, explains Badenhorst.
What if you’re still unsure about your annual leave entitlements?
"Ask your employer to explain how your entitlement has been calculated," says Badenhorst.
"If the parties end up in a dispute they cannot resolve, they should seek independent legal advice from a lawyer who understands the Holidays Act."
The Labour Inspectorate is another avenue for employees to enforce their minimum entitlements, she adds.
Information provided in this article is general only and it does not constitute legal advice and should not be relied upon as such. SEEK provides no warranty as to its accuracy, reliability or completeness. Before taking any course of action related to this article you should make your own inquiries and seek independent advice (including the appropriate legal advice) on whether it is suitable for your circumstances.
