TRANSFERING & DONATING LEAVE ENTITLEMENTS EARNED UNDER THE HOLIDAYS ACT– CAN YOU DO IT?

In this post, I want to talk about whether an employee can transfer leave from one company to another, or from one country to another. And I’ll also consider whether an employee can donate their leave to another employee.  This is all regarding minimum entitlement earned under the Holidays Act.

So, to start with the answer is no.

Transferring leave from business to business

I get asked this question from time to time when a business is part of a group, and employees can move between different companies within the group.  Now, if the group is all under the same legal entity (the employer name is the same on the employment agreement), then all good, as the employee is still working for the same employer.  But if each business of the group is a separate legal entity and when the employee moves to a new business, there is a different employer name on the employment agreement, then no.  Moving to a different legal entity would mean for payroll a termination pay to finalise the relationship with the present employer and then starting as a new employee with the new employer.

Suppose you allowed the employee to move minimum leave entitlement (annual holidays, sick etc.) from one legal entity to another. In that case, this is an agreed term, which is not compliant with the Holidays Act requirements. There is nothing in the Act that allows for transferring leave entitlement between different legal entities, and there is no ability to contract out of the Act in this regard.  So, if this were done, the ex-employee could claim they never received their termination pay – annual holiday minimum entitlement and 8%. On the other side, if the leave had been transferred over to the new employer, this is not leave entitlement under the Holidays Act; it is leave provided as an agreed term. The bottom line is that the employee is winning both ways (claiming a termination pay not paid and getting agreed leave on starting with the new employer). 

Now, what you can do is recognise service. So, if the employee has worked for the previous employer for ten years when they move to the new employer (within the same group), their service can be recognised.  If the employee received an extra week of annual leave (a fifth week) that could be part of the new agreement with the new employer (within the same group), plus additional sick leave etc.  Again, this is nothing to do with the Holidays Act and would be an agreed term and an extra benefit provided to the employee. 

Transferring from one country to another

I do enjoy getting asked this question as I see the funny side to it.  If there is an employee of a New Zealand-based company with an employment agreement based on New Zealand law who moves to Australia to take up a position with an associated Australian company, rights to leave earned under New Zealand law stops at the border. New Zealand is not a state of Australia, and Australian law does not apply and vice versa if they were coming from Australia to New Zealand.  

If the companies in New Zealand and Australia agreed to move an employee’s leave entitlement across, this is again an agreed term. The New Zealand-based company is liable for the termination pay that was not paid to the employee on leaving the NZ company.

Now you need to look at the bright side of this, and that is New Zealand is the only country that has to deal with the nightmare of our Holidays Act; it can’t be exported!

Donating leave

There is no option to donate minimum leave entitlement earned under the Holidays Act from one employee to another.  Any opportunity to do this would be with additional leave given to an employee and then an agreement that an employee can donate or gift leave to another employee.

I have seen this done in many ways, such as an employee donating their additional annual, sick or bereavement leave.  They do this by donating as little as 0.5 of a day up to a maximum amount in any one year. This is held in a pool that another employee meeting specific criteria can apply for when needed.  Paid at the ordinary rate of pay, the leave is to be taken at the time and should not be held for a later date.

In conclusion, transferring minimum leave earned under the Holidays Act cannot be done between different legal entities or different countries.  It must be shown that minimum entitlement is used correctly by the employer with which the employee has earned the entitlement, including termination.  Donating leave is a great way an employee can support a colleague in times of need, but again the leave donated can only come from additional leave provided to the employee by agreement.

NZPPA supporting NZ payroll since 2007!

Leave a Reply

ePayroll FREE Weekly Newsletter

Payroll News, Tips and Advice Delivered FREE to your inbox. Privacy Statement: your email address will never be revealed to third parties.
Click here to access the ePayroll Archive