Should employees be able to trade in their fourth week of leave?

Who said the Holidays Act is boring? The Government's recent proposal to allow employees to cash in  the fourth week of their annual leave has whipped up a mini-political storm. Labour and the unions are dead against it, and a survey run by The New Zealand Herald generated 12 pages of comments from readers.

Those against it have come up with a wide variety of objections, of which the most oft-cited one has probably been that workers will be pressured into the swap by their employers, and that eventually we'll end up back with the three week entitlement.

Some of the arguments may have merit if the legislation is not carefully drafted. To prevent employees from being pressured into trading in the fourth week, the Government has said employers will not be allowed to make an offer - only employees can approach their boss and ask to make the trade. The Government argues that surveys show that most workers only take three weeks' leave each year, so trading in is a "win-win" if both parties agree to it.

There are other ways the Government could seek to prevent this being abused, which no doubt will be considered in due course. One is to make it explicit that offers of employment must not be made conditional on the employee asking to trade, and that employment agreements must not contain any clause stating the employee has asked to trade. Another is that employees could be prevented from trading away more than one week at a time, even if they have two years or more of accumulated leave.

Subject to adequate protections being put in place, however, I don't see anything wrong with this proposal. Employees are after all paid cash in lieu of all untaken annual leave when their employment terminates, regardless of when their new employment starts. And judging by the response to the Herald survey, there are employees out there who do want to take advantage of this - students who need extra cash, for example.

Many have pointed to European holiday entitlements, suggesting that if anything New Zealand should be increasing leave entitlements, not allowing people to trade them away. This is a controversial topic, however - there has been much debate in Europe about whether labour market inflexibility, particularly around things like leave entitlements, has adversely affected productivity.

Interestingly, in Australia and the UK, holiday-related leave is the same as ours: four weeks annual leave plus public holidays. In the US, it's two weeks plus public holidays.

Allowing employees to ask to trade in one week of their four week annual leave entitlement is hardly the beginning of the end of workers' rights.

 

Greg Cain

Greg Cain is an employment lawyer at Minter Ellison Rudd Watts.

 

 

 

Photo / John Borren