After years of confusion and costly remediation, the Holidays Act is set for a fundamental rewrite.
Speaking to business leaders in Tauranga, Workplace Relations and Safety minister Brooke van Velden declared that the government is ready to fix what many consider New Zealand’s most frustrating employment law.
At the Employers and Manufacturers Association (EMA) event last month, she detailed sweeping changes to the Holidays Act designed to replace complexity with simplicity.
She outlined a new framework that shifts leave entitlements to an hours-based accrual system, promising clarity and fairness for both employers and employees.
EMA Head of Advocacy and Strategy Alan McDonald, who introduced van Velden, welcomed the changes.
“The government is on the brink of fixing one of our most frustrating and confusing pieces of employment law,” he told the meeting.
“For years, the Holidays Act 2003 has been recognised as a minefield of complexity, legal risk, and unintended cost for both employers and employees.”
Alan McDonald
McDonald says the new framework looks to deliver a system that is simpler, fairer and far easier to navigate for all types of work.
“At the heart of the reform is the shift to an hours-based accrual system for annual and sick leave. Rather than waiting six or 12 months before leave starts to build up, entitlements now begin on day one, accumulating with every hour worked.”
Van Velden told the event that past remediation costs have run into the billions.
“I think it says a lot that even large businesses – with sophisticated software and HR and legal teams – have found themselves caught out by its calculations,” she says.
And van Velden notes that it was not just private sector employers affected – even the Ministry for Business, Innovation and Employment and other public sector employers had been affected.
“There’s a near consensus that the current system is broken. The message I’ve been receiving across the country has been consistent: the status quo is holding the economy back, and patchwork fixes just won’t do. This is a root and branch replacement of the current Act.”
Under the proposed new system, leave will be earned, taken and paid in hours. Employees will earn both annual and sick leave in direct proportion to their contracted hours of work. The hourly accrual rate for annual leave will be set to provide the equivalent of four weeks’ annual leave for employees who work the same number of contracted hours all year, or the equivalence of the status quo.
“For most people, leave entitlements will stay the same – what will change is how it is calculated,” she says.
For example, an employee working 40 hours per week will earn the same amount of leave, but it will be expressed as 160 hours rather than four weeks.
“And finally, gone are the days of multiple, confusing calculations for leave payments,” she says.
Under the new system, the same hourly leave pay rate will be used for all leave types. It will be based on an employee’s base wage for the day of leave. For those on piece rates, where an employee is paid for the number of units completed like the number of buckets of apples picked, an average hourly rate will be used.
“The aim here is simplicity,” says van Velden.
“Employers and employees alike will know exactly what their minimum entitlements are.”
Brooke van Velden at the EMA event in Tauranga. Photo: Supplied
