Your guide to the upcoming sick leave changes

2021 is already proving to be another big year for New Zealand employers and we know there’s a lot to keep up with.

One change that will be taking effect on Saturday 24 July 2021 affects employee sick leave entitlements – entitlements for eligible employees will be increasing from five to ten days per year.

To help you understand this change and how it will affect your workplace, Humankind have created this guide. In it, we will cover:

• FAQs – including a detailed overview of the changes
• How to prepare your workplace for these changes
• What else you might need to consider

We know employers come across some challenging situations when dealing with sick leave. If you have any questions about how these changes will affect your workplace, please get in touch with one of the team at Humankind.

FAQs

What changes are being made to sick leave entitlements for employees?

Two changes will be made to sick leave entitlements for employees:

1) Minimum sick leave entitlements will increase to 10 days per year

Currently employees are entitled to a minimum of five days’ sick leave for each 12-month period if they:

• have six months’ current continuous employment with the same employer; OR
• 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.

Employees will still need to meet the criteria set out above, which means the six-month ‘waiting period’ for sick leave will still apply for now (this is likely to change in the future when more wide-sweeping changes are made to the Holidays Act 2003).

2) The amount of sick leave employees can carry over will change to 10 days per year

Currently, employees can carry over up to 15 days’ sick leave, up to a maximum of 20 days’ current entitlement in any year. This change means employees will only be able to carry over 10 days’ sick leave, up to a maximum entitlement of 20 days per year.

This change does not affect the total amount of sick leave an employee can accumulate – the change simply means that the amount of leave that can be carried over each year has been adjusted to align with the entitlement increase.

Employers can still choose to offer more than the minimum provisions. For example, employers can offer more than 10 days’ sick leave per year, allow employees to carry over more than 10 days each year, or allow employees to accumulate more than 20 days’ sick leave in total.

These changes will take effect from 24 July 2021.

How do I apply these changes to my existing employees?

Although these changes take effect from Saturday, 24 July 2021, existing employees won’t automatically be entitled to extra days of sick leave on this date. Instead, the increase to 10 days’ sick leave entitlement will take effect when existing employees next become entitled to sick leave from 24 July 2021.

For example, Hana’s employment with Solutions Limited began on 1 June 2020. On 1 December 2020, after six months of employment, Hana became entitled to five days’ sick leave. Hana will next become entitled to sick leave on 1 December 2021. As this is after 24 July 2021, Hana will be entitled to 10 days’ sick leave on 1 December 2021.

If Hana has not used her 5 days’ sick leave from 2020, she can carry this over. This means that Hana will have 15 days’ sick leave from 1 December 2021 (the 5 days she received on 1 December 2020, plus the 10 days she received on 1 December 2021). Going forward, Hana can carry over up to 10 days each year, accumulating up to 20 days’ current sick leave entitlement.

How do I apply these changes to new employees?

The increase to 10 days’ sick leave entitlement will take effect when new employees first become entitled to sick leave (from 24 July 2021). To be eligible for sick leave, new employees will still need to meet the criteria set out in Question 1, which means the six-month ‘waiting period’ for sick leave will still apply.

Who do these changes apply to?

This change applies to all employers in New Zealand, and all employees who meet the eligibility criteria for sick leave (set out in Question 1 above) - this includes part-time and casual employees who meet the criteria. If a part-time or casual employee is eligible for sick leave, their entitlements are not pro-rated in any way. For example, a part-time employee who works two days each week is still entitled to 10 days sick leave from 24 July 2021 and can accumulate up to 20 days’ sick leave a year. These changes don’t affect contractors who are not entitled to sick leave.

Why are these changes being made?

The Government has explained that the COVID-19 pandemic really highlighted the need for this change. New Zealanders can tend to have a ‘tough it out’ approach to sickness, coming into work when they are unwell even though this might risk spreading illnesses.

However, COVID-19 isn’t the only reason that sick leave entitlements have been reviewed. Compared to workers in many other countries in the developed world, New Zealanders don’t fare well when it comes to paid sick leave. For example, workers in Australia and most of Europe are entitled to significantly more paid sick leave than workers in New Zealand.

Employers have had mixed reactions to the increase in sick leave entitlements and we understand why. However, increased sick leave may also bring some benefits for employers. A good example of this is New Zealand’s cold and flu rates last year. 2020 saw many people with sniffles and coughs remaining at home and the impact of this was huge – according to the Ministry of Health, only 6 flu cases were detected in New Zealand between April and August 2020 (a 99.8% reduction from the same period in the previous year). Although this is a fairly extreme example, if people are supported to keep their distance while unwell, this could mean shorter recovery times and significantly fewer absences due to illnesses.

How you can prepare for these changes

With these changes taking effect in less than a month, it’s important to consider the steps you can take to prepare your workplace. This might include:

• Considering how you will communicate these changes to your team. Make sure your people managers have a good understanding of the changes and are equipped to answer questions. Although you might have mixed feelings about these changes, as you communicate the news to your employees, it’s important to put this to the side and recognise that these changes are likely to be great news from the perspective of your employees.
• Understanding how these changes will affect your payroll and record-keeping to make sure changes are implemented smoothly.
• Reviewing and updating the relevant terms in your employment agreements, handbooks, and policies. This is a good time to review your employment documents and consider whether any updates are needed.
• Considering how these changes might affect resourcing in your organisation. Do you have enough cover when people are unwell? Could you consider cross-training or bringing in casual employees to make sure your resourcing is stable and flexible, even when winter bugs make an appearance.
  

What else to consider

We know that sick leave isn’t just about entitlements and payroll. As we prepare for these changes, we’d recommend taking some time to think about the following points:

• Taking time to recover when working flexibly: We are seeing more and more employees using technology to work more flexibly. This ability to work ‘anywhere- anytime’ can offer great flexibility to people; however, it can also make switching off and having downtime more challenging for employees. It’s important for employers to discuss this with their teams, encouraging employees to disconnect and finding ways to ensure that people have an opportunity to rest and recover when they are unwell.
• What can I do if I’m worried about sick leave being abused? If you are worried about high absence levels in your workplace, we also suggest taking a step back and reviewing your workplace culture and your team’s engagement levels. Culture and engagement have a huge impact on absenteeism. This is a great time to get a head start on understanding your employees’ experience and tackling any issues that might be contributing to extra absences.
• What’s next? The changes taking effect on Saturday 24 July 2021 are just one part of the Holidays Act 2003 changes we are expecting to see in the next 12-18 months. It’s important to stay up to date so that you are prepared and ready to smoothly roll out any future changes. You can learn more about the changes we are expecting on the Ministry of Business Innovation and Employment’s website: https://www.employment.govt.nz/about/news-and-updates/ or on our recent blog ‘Changes to the Holidays Act’ here: https://www.humankind.nz/blog/changes-holidays-act/

If you have any questions about how these changes will affect your workplace, please get in touch with one of the team at Humankind.