REMUNERATION Another Week’s Leave – Is that part of your Ideal Salary Package?

The initial part of the Government’s new Holidays Act (introduced on April 1 this year) focuses on variety of remuneration issues – including the rate of pay for staff working extra time, after hours and during public holidays. The next part of the act, effective in another three years, promises to spark an equally heated debate among employers and employees alike. It specifies an increase in the minimum annual leave entitlement of all staff.
At face value, it seems that companies are mainly concerned about productivity and staffing levels: there is direct cost associated with extra leave. In theory, more people will need to be employed and trained to do the same amount of work.
But far more interesting issue is likely to boil to the surface. With most New Zealand managers, 76 percent to be exact, and ranging from middle management ranks upwards already receiving four weeks’ leave, will they expect to be offered five weeks’ leave in future?
Before guessing at the answer, it’s helpful to consider why managers are currently receiving four weeks’ rather than the more conventional three weeks’ leave. Higbee-Schäffler’s March 2004 “Corporate Services Survey” showed that 85 percent of medium-to-large organisations offer four weeks’ leave to managers. The research also spells out the rationale for the additional leave.

The three main reasons are:
1. It is provided as an additional perk to denote hierarchy or seniority in the organisation.
2. It is used as mechanism to reward staff for service and as retention device.
3. It is way of differentiating the company as an ’employer of choice’ in its industry.
In essence, employers use the extra week’s leave as way of differentiating status. It shows that higher-level employees get more or better benefits, and underscores an incentive to lower-level employees. The inference is that they too could become eligible for the extra leave by going the extra mile and advancing up the corporate ladder.
Perhaps it also suggests (justifiably) that people in higher-level positions generally work longer hours and have more stress, and are thus entitled to more leave.
When four weeks’ leave becomes the compulsory, minimum entitlement, there will be nothing ‘additional’ about the benefit. There’s strong probability that many managers will lobby for fifth week to maintain their ‘additional’ benefit.

Breathing space
While there is plenty of debate raging about the viability and appropriateness of the legislation and the impact of an extra week’s leave on the New Zealand economy, there is at least some time to consider how to deal with it.
The delayed introduction gives employers – as well as employees – little breathing space and the opportunity to think carefully about how the legislation might impact company’s overall benefits philosophy. It presents the chance to adapt and reshape reward strategies and examine the options it offers employees. As always, every company’s requirements – and thus its remuneration and benefits policies – will be different.
A number of issues are worth considering:
A key one – currently in vogue – is work/life balance. Higbee-Schäffler’s research indicates that many employees are increasingly receptive to trading remuneration for more family time – particularly if they are young parents with small children. Many employees are attracted to companies with family-friendly policies, and often elect to sacrifice pay for more leave. Companies offering this flexibility are also likely to score as an ’employer of choice’.
A counter-argument is that companies should be wary of offering additional leave (ie, extending the entitlement to ‘five’ weeks after April 2007) because it sends the wrong messages. It may be harmful to differentiate status when so many companies are trying to build ‘team culture’ – to create an environment that says ‘we’re all in this together’: with common focus rather than ‘them-and-us’ culture.
If fifth week of leave is offered, how should it be incorporated into the overall ‘benefits package’? Should the option be offered as mechanism to denote seniority – or long service? Both? Neither?
Should fifth week’s leave be presented as part of company’s competitive advantage? tool to help recruit and retain the right staff?
Love it or loathe it, the Holidays Act is here to stay. The deferred introduction of the four-week leave component at least gives employers and employees the opportunity to think proactively. The opportunity to assess not just what the law is saying they ‘have’ to do, but how to adapt their current strategies most effectively.
It’s an opportunity to incorporate annual leave into the reward mix, and optimise its effect. It’s another chance to add value to the overall benefits package in flexible and proactive way.

How do you feel about holiday leave as part of your Ideal Salary package?
Management and remuneration consultants Higbee-Schäffler are conducting an “Ideal Salary Survey”. What do you think constitutes the Ideal Salary? This is part three of series of articles on the importance of salary package benefits and we want you to respond to the questions on the survey form in this issue of Management magazine or go to Management’s website at www.management.co.nz.
The questionnaire has been compiled in consultation with Higbee-Schäffler, which will analyse the results and, at the end of the year, compile the data to reveal our readers’ Ideal Salary Package.
Fax back the questionnaire in this issue or visit www.management.co.nz to take part in Management’s Ideal Salary Survey and we’ll email you copy of the complete survey results at the end of the year.

Kira Schäffler has written this article on behalf of NZ remuneration consultancy Higbee-Schäffler.

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