The law that has governed New Zealand holiday pay for more than two decades is on its way out. The Employment Leave Bill passed its third and final reading in Parliament on Wednesday, repealing the Holidays Act 2003 and replacing it with a system that counts leave in hours rather than in weeks and days.
Workplace Relations and Safety Minister Brooke van Velden said the reform “delivers on the Government’s priority to replace the broken Holidays Act with a leave system which is simple and straightforward”, so that employers have confidence in their calculations and employees have confidence they are being paid correctly. She said New Zealanders had “been asking Governments to do something about this legislation for years”, and in particular had been asking for an hours-based accrual system. “This Government has listened, and I am proud that this reform has finally been delivered,” she said.
The Holidays Act has been a running sore in New Zealand workplaces since it was written. Its formulas for working out holiday pay were built around the idea of a normal working week, which is straightforward for someone on a fixed nine to five roster and close to unworkable for the growing share of people whose hours move around. Payroll systems were routinely set up wrongly, errors compounded quietly over years, and organisations from supermarkets to district health boards ended up running remediation programmes worth hundreds of millions of dollars to pay staff what they should have received the first time. Three governments in a row promised to fix it.
The mechanism at the centre of the new law is a shift from entitlements that arrive in lumps to entitlements that build up as you work. Under the Holidays Act, employees waited six months for sick leave and a full year for annual leave. Under the new regime both start accruing from day one, in hours, in proportion to the hours a person is contracted to work. Bereavement leave and family violence leave also become available from the first day of a job rather than after a qualifying period. All leave will be paid at a single hourly rate, which removes the comparison between average weekly earnings and ordinary weekly pay that caused so much of the trouble in the old law.
To make that work, the legislation sorts working time into three buckets. Standard hours are the hours a person is engaged to work, and those are what annual leave and sick leave accrue against. Additional hours and casual hours sit outside that, and instead attract a leave compensation payment of 12.5 percent paid on top of the hourly rate. For casual employees, that replaces the current 8 percent pay-as-you-go holiday pay, so most casuals should see more in the hand for each hour worked. Workers will also be able to cash up a quarter of their annual leave balance each year, and employers will have to issue pay statements that show how leave has been calculated. New parents returning from parental leave will get their full pay for annual leave taken afterwards, ending a long-standing quirk that left people financially penalised for having a baby.
Public holidays get a new test as well. The question of whether a particular day would “otherwise be a working day” for a given employee has been one of the hardest calls under the old law, especially for people on rotating rosters, and the bill sets out a fresh test for making that decision.
None of this happens quickly. The Act carries a lead-in period of 24 months after Royal assent before it takes effect, giving payroll providers and employers time to rebuild systems, with a further year after commencement to bring individual employment agreements into line. In practice that means the first pay run under the new rules lands in 2028, well after the general election on 7 November.
That timing matters, because Labour and the Greens have not accepted the Government’s framing and will still be in a position to argue about it. When the Education and Workforce Committee reported the bill back by majority in July, both parties filed minority views. Labour said the bill “promotes insecure work” and argued that tying leave to standard hours rather than to all hours actually worked means two people doing the same job for the same employer can end up with different entitlements depending on how their hours are classified on paper. On sick leave the party was blunter, saying it “is a health and well-being entitlement, and it should not be diluted for workers whose hours are irregular, variable, or additional to standard hours”. The Greens said “those who have less to spare are the ones taking a pay cut under this bill”, and warned that pro-rating sick leave for part-time staff would fall hardest on women, who make up the bulk of the part-time workforce.
Business groups have argued the opposite for years. BusinessNZ has pushed for accrual-based leave for well over a decade and welcomed the bill when it was introduced, calling the move to hours-based accrual the most significant change in leave legislation since paid holidays arrived in the 1940s. The select committee heard from roughly 660 submitters, which is a fair signal of how many people thought they had something at stake.
Both sides are, in a sense, describing the same trade. The old law promised entitlements that were generous on paper and frequently calculated wrongly in practice. The new one promises entitlements that can be worked out to the hour, at the price of scaling some of them to contracted hours rather than to everything a person actually works. Whether that reads as a fix or a cut depends a great deal on how regular your roster is.
The Government has published plain-language material through Employment New Zealand, with fuller detail on the reform available from MBIE. If you want to see where the parties stand on workplace law and everything else before you vote in November, you can compare them with our voting tool.
Do you work variable, part-time or casual hours, and does this change leave you better or worse off? Have your say in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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