Q: We have an employee who is currently on a fixed-term agreement (May 24 to Mar 25). They are paid 8% of their gross earnings (identifiable component) in their earnings for each pay period. Their hours fluctuate in each pay period. The company would like to extend their contract to Dec 25.
Payroll is concerned that, as the employee will work over 12 months, they will be entitled to 4 weeks of annual leave after completing 12 months. Could we add a clause to the fixed-term extension letter (Holidays Act S28, subsection 3) stating that holiday pay is reduced by the amount already paid?

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A: It should have been done in the original fixed-term agreement. Doing it now is disadvantaging the employee (they miss out on getting four weeks of entitlement and being paid for that leave).

It is up to the business to do this (if the employee agrees and understands what impact that will have on them), but it is not in any way being a good employer.

HR needs to wake up and put the clause in the employment agreement as a standard clause so it’s available to use and is upfront with the employee from day one.