In order to make this determination, it is important to understand the different types (classifications) of sick leave entitlements that exist:

The vast majority of New Zealand entities have Accumulated and non-vesting sick leave entitlements (B(ii)).
However, for entities where this is not the case, and/or entities with operations in other overseas jurisdictions, the specific classification will need to be
assessed and determined.
How each of these classifications is accounted for under NZ IAS 19 is detailed below:
A – Non-accumulating
For each employee, determine (based on past experience and other judgements and estimates) how many days of the sick leave accrued as at period end
would be used before those days expire, and accrue only for those days.
The accrual will meet the definition of a short-term employee benefit.
B(i) – Accumulating and vesting
For each employee, accrue the entire amount, as well as estimate as to WHEN the leave would be likely to be settled (based on past experience and other
judgements and estimates), being either:
(i) Through being taken as sick leave, or
(ii) Paid out upon termination of employment (if applicable in the relevant jurisdiction).
If there is any sick leave, for any single employee, where the “WHEN” is greater than 12 months after reporting date, then the entire sick leave accrual
in aggregate, for all employees, fails the definition of a short-term employee benefit (i.e. as the balance is not expected to be WHOLLY settled within 12
months of reporting date).
Instead, the entire sick leave entitlement balance of the entity is classified, and measured, as an other long-term liability (refer to section 2. above).
This may require the entity to engage actuarial specialists in order to correctly model the sick leave entitlement obligation.
B(ii) – Accumulating and non-vesting
In this situation, the employee only benefits from sick leave entitlements if they actually make use of it whilst they are employed (i.e., accrued balances are
not paid out if they cease employment).
Further, because sick leave entitlements get (automatically) topped-up at each employee’s annual anniversary date, an entity only needs to accrue, for
each employee, the number of sick days expected to be taken over-and-above their annual sick leave entitlement, provided they have sufficient historical
accrued sick leave at reporting date.
Consider the below examples for an illustration of this point.
|
Scenario A |
Scenario B |
Scenario C |
Scenario D |
Annual entitlement |
10 days |
10 days |
10 days |
10 days |
Accrued sick leave days at
year end |
18 days |
1 day |
18 days |
- |
Expected sick leave to be
taken in the 12 months
after year end |
11 days |
11 days |
9 days |
11 days |
Days of sick leave to accrue |
1 day
(i.e., the excess of the 11 days of expected leave, less, 10 days of annual entitlement to be earned in the next year, to which the employee has a sufficient accrued sick leave entitlement balance of 18 days)
|
1 day
(i.e., the excess of the 11 days of expected leave, less, 10 days of annual entitlement to be earned in the next year, to which the employee has a sufficient accrued sick leave entitlement balance of 1 day)
|
-
(i.e., as the employee’s 10-day annual entitlement to be earned in the next year will sufficiently cover the 9 days of expected sick leave to be taken, no sick leave need be accrued)
|
-
(i.e., at reporting date, the employee does not have an accrued sick leave entitlement to cover the excess in expected leave to be taken – presumably, this would need to be taken as unpaid leave)
|
Here, you can see that when you are dealing with accumulating and non-vesting sick leave, the key factors to consider are not necessarily how many sick leave entitlement days an employee actually has contractually accrued, but rather what their expected sick leave usage is in the next 12 months over-and-above the next annual entitlement top-up that the employee will receive.
The accrual will meet the definition of a short-term employee benefit.