Business and employer groups have welcomed the review of the Holidays Act, saying the legislation is too complex and adds significant compliance costs for businesses.

Labour Minister Kate Wilkinson yesterday announced the working group that has been appointed for the review, featuring two appointments each from Business New Zealand and the Council of Trade Unions.

The terms of reference of the review include the calculation of relevant daily pay, trading annual leave for cash at the employee’s request and transferring the observance of public holidays.

Business New Zealand chief executive Phil O’Reilly calls the review of the Act, which was passed in 2003, “well overdue”.

Employers have had a lot of problems with this legislation ever since it came into force, he says.

“Among other things, its formula for calculating holiday pay uses irrelevant variables and is so complex that it significantly increases payroll administration costs in many companies.

“Administration around the payment for public holidays is similarly complex and time-consuming.

“The business community has made its concerns known about the Act since 2003 and we are pleased these are finally being heard.”

The Act has been one the single biggest problems for employers and a thorough review is warmly welcomed, says David Lowe, Employment Services Manager for the Northern Employers and Manufacturers Association.

"The Act is based on antiquated work practices which assume people work 9-5 and take holidays in periods of one week," Mr Lowe says.

"Employers often find ways of allowing holidays that are fair to both employees and the business, even though they may not technically comply with the law.”

Ensuring the holidays law reflects the modern New Zealand workplace, and is easily understood and complied with, is a complex job, he says.

"Addressing the problems of the Holidays Act is another major step towards making it attractive and easier for businesses to employ people.

"Each member of the review group is well qualified for the task."