New bill's passing a 'major step towards a leave system that is fairer, simpler and easier'
New Zealand's Employment Leave Bill has passed its third and final reading in Parliament, in a development businesses hailed as the most significant improvement in the country's leave system.
The Employment Leave Bill replaces the current Holidays' Act 2003, which has faced criticism for being "complex" and "confusing" among employers.
"This Bill 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 – a benefit to workers and businesses alike," said Workplace Relations and Safety Minister Brooke van Velden.
Among the major reforms in the legislation include the shift to a standard hours-based calculation for annual leave entitlements. Other aspects of the law include:
- Annual, sick, bereavement and family violence leave available from the first day of work
- Use of a single hourly rate for paying leave, across all types of leave
- A new 12.5% Leave Compensation Payment for additional and casual hours, instead of accruing annual leave and sick leave for those hours
- Mandatory pay statements that itemise pay and leave in a way that's transparent and easy to understand
- Greater flexibility to cash up annual leave, with workers able to cash up 25% of their total annual leave balance each year
- A new Otherwise Working Day test for those who work additional days or do not have a specified pattern of work
- Removal of annual leave payment penalty for those returning from parental leave
According to the government, there will be a 24-month lead-in before the changes to the new leave system take effect in order to give employers and payroll providers a managed transition.
The Employment Leave Bill's passing comes after strong criticism of the Holidays Act, which employers have called out as "complex," with confusion surrounding the legislation leading to huge remediation costs.
"Achieving this milestone for workplaces is thanks to the hard work and generous time of those who have shared the vision of a better leave system, and have contributed their expertise and experience to the policy process," Van Velden said.
"We've already had decades of overcomplicated legislation so now that we've finally settled on a simpler path forward, I hope it will be enduring to give businesses and workers the simplicity and stability they need."
A 'major step' to a simpler leave system
Businesses across New Zealand welcomed the passing of the Employment Leave Bill and called it the most significant improvement in the country's leave system.
"After years of reviews and reform attempts, the new legislation finally delivers what businesses have been seeking: a simpler, more practical system for both employers and employees," said Alan McDonald, Head of Advocacy and Strategy at the Employers and Manufacturers Association (EMA).
"This reform won't remove every employment law challenge, but it is a major step towards a leave system that is fairer, simpler, and easier for everyone to understand and apply."
McDonald said the move to an hours-based accrual system is a "sensible and long-overdue" change that will make leave calculations more straightforward and transparent.
"We have consistently supported an hours-based accrual model because it reflects the way people actually work," he said.
"It creates a fairer and more consistent framework for employees, particularly those who work part-time, variable hours or flexible arrangements, while giving employers much greater confidence that they're meeting their obligations."
The EMA also welcomed the 24-month implementation period before the new system takes effect, noting the time needed by businesses to update their systems, review employment agreements, and prepare for new requirements.
"The transition period is essential to ensure businesses can implement the reforms properly and avoid repeating the problems that have plagued the current system," he added.
Initial guidance and a timeline for more resources will be available once the Bill receives Royal assent, according to the government. Comprehensive guidance to support implementation will be provided on the Employment New Zealand website.
