Sick leave in New Zealand is governed by the Holidays Act 2003 and is a personal entitlement that every employee is entitled to. However, many NZ employers misunderstand sick leave rules, leading to disputes and underpayment claims.
This guide covers sick leave entitlements, accrual, payment calculations, and the conditions under which employers can request proof of illness.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult an employment lawyer for guidance specific to your organization.
How Much Sick Leave Are Employees Entitled To?
Under the Holidays Act 2003, all employees are entitled to a minimum of 5 days of paid sick leave per year. This is a personal, individual entitlement — not a shared benefit.
Entitlement Details
- 5 days per year (minimum)
- Paid at Ordinary Weekly Pay (OWP) divided by ordinary working days per week
- Accrues week-by-week from the first day of employment
- Does NOT expire if not used (unlike some systems)
- Cannot be cashed out unless the employment ends
Some enterprise agreements provide more than 5 days (e.g., 6, 7, or 10 days). Check your agreement with employees.
Accrual of Sick Leave
Sick leave accrues continuously from the first day of employment:
Accrual Rate
5 days ÷ 52 weeks = 0.096 days per week
For a standard 5-day work week:
- 0.096 days × 5 days per week = 0.48 days per week (or about 3.8 hours/week)
Monthly Accrual
- 0.48 days × 4.33 weeks/month = 2.08 days per month
- Or about 0.42 hours per working day
Accrual Example
An employee working Monday-Friday (5-day week) accrues approximately:
- Per week: 0.48 days
- Per month: 2.08 days (about 2 days + 7 hours)
- Per year: 24.96 days (which is above the 5-day minimum if they’re not using leave)
Payment Rate for Sick Leave
Ordinary Weekly Pay (OWP)
Sick leave is paid at OWP divided by the number of ordinary working days per week.
Formula:
- Payment per day = OWP ÷ ordinary working days per week
- Payment = daily rate × days of sick leave taken
Calculation for Standard 5-Day Week
Employee earning OWP of $1,000/week:
- Daily rate: $1,000 ÷ 5 days = $200/day
- 1 day of sick leave: $200
- 3 days of sick leave: $600
Calculation for Non-Standard Hours
Employee working 4 days per week (32 hours) with OWP of $800:
- Daily rate: $800 ÷ 4 days = $200/day
- 1 day of sick leave: $200
Employee working irregular hours:
- Daily rate: OWP ÷ average ordinary working days per week
When Can Employees Use Sick Leave?
Sick leave can be used for:
- Personal illness or injury — The employee is unable to work
- Caring for a sick family member — Unplanned child care, elder care, etc.
- Bereavement — Some employers allow immediate bereavement use before formal bereavement leave
- Medical appointments — Some employers negotiate flexible use
Sick leave cannot be used for:
- Planned medical appointments (employers can reasonably expect this to be taken as annual leave or negotiated as flexible time)
- Holidays or leisure
- Emergency personal matters (request unpaid leave or annual leave)
Proof of Illness: Medical Certificates
When Employers Can Request a Certificate
An employer can request a medical certificate if:
- Absence extends beyond 3 consecutive days — A doctor’s note is reasonable for illness lasting 4+ days
- Pattern of absences — If the employee has frequent single-day absences or a pattern of Mondays/Fridays, a certificate is reasonable
- Reasonable suspicion — If the employer suspects the absence isn’t genuine, a certificate can be requested
Employer Cannot Demand a Certificate For:
- A single day of sick leave (unless there’s a pattern)
- 2-3 consecutive days in most cases
- Regular absences without context
Cost of Medical Certificates
Typically:
- Employer absorbs the cost of requiring a certificate (good practice)
- Or the employee pays if the employer requests it
- Agreements vary; check yours
Part-Time and Casual Employees
Part-Time Employees
Part-time employees accrue sick leave on a pro-rata basis:
Calculation:
- 5 days × (ordinary hours per week ÷ ordinary full-time hours) = entitlement
Example: Part-time employee working 20 hours/week in a 40-hour organization:
- 5 days × (20 ÷ 40) = 2.5 days per year
Casual Employees
Casual employees accrue sick leave at the same rate, based on hours worked.
Example: Casual working variable hours averages 15 hours/week:
- Accrual: 5 days × (15 ÷ 40) = 1.875 days per year
Carryover and Expiry
Does Sick Leave Expire?
The Holidays Act doesn’t specify that sick leave expires. However:
- Some enterprise agreements include an “use it or lose it” clause for sick leave
- If the agreement specifies expiry, that applies
- Otherwise, sick leave carries over indefinitely
Best practice: Allow sick leave to carry over, as it represents a genuine benefit for employees with ongoing health needs.
Sick Leave Management Practices
Best Practices
- Communicate your policy — Inform employees how to report sick leave and when proof is required
- Be flexible — Not every illness requires a certificate
- Respect privacy — Don’t probe into details of illness without need
- Track balances — Use a leave management system to track accrual and use
- Educate managers — Ensure line managers understand that sick leave is a right, not a privilege
Problematic Practices
❌ Don’t require a certificate for every absence ❌ Don’t deny sick leave requests without cause ❌ Don’t count sick leave as “unproductive” in performance reviews ❌ Don’t require excessive medical evidence ❌ Don’t dismiss the pattern of sick leave without considering legitimate health conditions
When Employment Ends
If an employee terminates with unused sick leave:
- The sick leave does not need to be paid out (unlike annual leave)
- Some agreements allow payout; check yours
- In practice, most employers don’t pay out unused sick leave
This differs from annual leave, which must always be paid out on termination.
Common Mistakes
1. Denying Sick Leave Requests
Employees have a right to take sick leave when genuinely ill. Denying leave without justification breaches the Act.
2. Requiring a Certificate for 1 Day
Employers should not routinely require a certificate for single-day absences unless there’s a pattern.
3. Counting Sick Leave Against Performance
Evaluating an employee negatively for sick leave usage (unless excessive and suspicious) is unfair and potentially discriminatory.
4. Not Tracking Accrual
Many employers don’t track sick leave balances, leading to overpayment or disputes.
5. Confusing with Annual Leave
Sick leave is separate from annual leave. Employees get both 5 days sick + 4 weeks annual.
6. Cashing Out Sick Leave
Cashing out sick leave is generally not permitted unless the employment is ending and the agreement specifies.
Record Keeping
You must keep records of:
- Each employee’s sick leave balance and accrual
- Dates sick leave was taken
- Amounts paid
- Any medical certificates provided
- Reasons for denying leave requests (if applicable)
Retain records for at least 6 years.
Disputes Over Sick Leave
If an employee disputes their sick leave entitlement or balance:
- The Employment Relations Authority (ERA) can investigate
- The employer has the burden of proof for denying leave
- Back pay may be ordered if the employer underpaid
Key Takeaways
- All employees are entitled to a minimum of 5 days of paid sick leave per year
- Sick leave is paid at OWP ÷ ordinary working days per week
- Accrual starts from day 1 of employment
- Employers can request a medical certificate for absences >3 consecutive days or patterns
- Sick leave does not expire (unless the agreement specifies)
- Unused sick leave is not paid out on termination (unless the agreement specifies)
- Part-time and casual employees accrue on a pro-rata basis
- Keep detailed records for at least 6 years
Using a leave management system ensures accurate accrual tracking and simplifies proof of payment if disputes arise.
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