Increase in Paid Sick Leave entitlement - What you need to know

On 24 May 2021 the Holidays (Increasing Sick Leave) Amendment Bill gained royal assent and came into effect as an act. This act will apply as of 24 July 2021 and increases the amount of paid sick leave to which an employee is entitled from five days per annum to 10 days per annum.

How does this change affect current staff?

The key item to understand is that this increase is not applied unilaterally to all staff at the same time. Employees will be provided with their 10 day allocation on their first sick leave anniversary date that falls on or after 24 July 2021. Any employees reaching their sick leave anniversary date prior to this will still only receive five days. We’ve shared some example scenarios below.

• Scenario 1: Employee A commenced employment on 1 April 2020. As per the requirements of the Holidays Act 2003, upon reaching six months of continuous service they were provided with five days of paid sick leave entitlement on 1 October 2020. They are due to receive their next entitlement of paid sick leave on the anniversary of this date i.e. on 1 October 2021. As this date falls after the 24 July effective date of the change, they will therefore receive 10 days of paid sick leave entitlement on 1 October 2021.
   
• Scenario 2: Employee B commenced employment on 1 January 2020. As per the requirements of the Holidays Act 2003, upon reaching six months of continuous service they were provided with 5 days of paid sick leave entitlement on 1 July 2020. They are due to receive their next entitlement of paid sick leave on the anniversary of this date i.e. 1 July 2021. As this date falls before the 24th July effective date of the change they will therefore still receive five days of paid sick leave entitlement on 1 July 2021. The employee would not therefore receive their first provision of a 10 day entitlement until their following sick leave anniversary date on 1 July 2022

How does this change affect new staff?

Any new staff employed in the future will receive 10 days’ sick leave entitlement upon reaching their first 6 month anniversary of employment. This means any employee who has commenced with the employer on or after 24 January 2021 will receive the 10 day entitlement upon reaching their first six month anniversary.

Does this change apply to casual staff?

In order to qualify for the provision of a paid sick leave entitlement, an employee must meet one of the two following conditions:

1. They have six months’ current continuous employment with the same employer, or
2. They have worked for the employer for six months for:
   - an average of 10 hours per week, and
   - at least one hour in every week or 40 hours in every month.

If a casual employee meets the criteria above, then they will be entitled to a paid sick leave entitlement in the same way as a contracted employee. They would therefore be entitled to the new 10 day entitlement.

Please note – Sick leave is not prorated in any way. If you have a part time employee who only works 1 day per week, they will still be entitled to 10 full days of sick leave on their first anniversary on or after 24 July 2021.
 

Are there any other changes contained within the act?

Yes, currently employees may carry over a maximum of 15 days of paid sick leave per annum. This means when they received their new entitlement upon reaching their sick leave anniversary date (currently 5 days) they will hold a maximum of 20 days of entitlement.

As of 24 July 2021, the maximum carry-over will reduce from 15 days to 10 days. This ensures that, when they receive their new 10 days entitlement, they may still only hold a maximum of 20 days of entitlement.

For more on this topic, read Accounting considerations for new Sick Leave Entitlements (NZ IAS 19) or contact your BDO Adviser.