Despite being frustrating to navigate, the Act is staying in its current form for the time being
New Zealand’s Holidays Act faces growing scrutiny from legal experts and HR professionals alike, with its framework creating risks for employers operating in today’s flexible work environment.
Whilst frustrating to navigate for employers, the Holidays Act remains in place in its current state – with the government “aware of longstanding concerns” and a reform plan currently in the works.
“Resolving these issues is a priority for the Government,” the Ministry of Business, Innovation and Employment, say on their website.
“In December 2024, officials were directed by the Minister for Workplace Relations and Safety to take a new approach to reforming the Holidays Act, with a focus on simplicity, improving workability and reducing compliance costs,” the statement reads.
According to Michael Witt, partner at McVeagh Fleming law firm in Auckland, the legislation no longer reflects the realities of how people work.
“The Holidays Act, as it stands at present, has not kept up with the way workplaces have developed,” he emphasised, “It’s mostly adequate if someone works nine to five, Monday to Friday—but the moment working patterns vary, the Act provides little to no answers.”
Witt identifies three key areas that create the greatest legal uncertainty for employers: defining a working week, establishing entitlement on public holidays, and calculating the monetary value of leave. Each, he says, can become a compliance trap if employers don’t take proactive steps.
“For many small to mid-sized employers, defining what a ‘week’ means for leave entitlements is simply not in their contemplation,” he said, “It only becomes an issue once a liability arises.”
The Holidays Act bases annual leave on four weeks, but without a standardised definition of a ‘week’ that accounts for variable or part-time patterns, inconsistencies are inevitable – especially in industries such as hospitality or the care sector.
To avoid that ambiguity, Witt advises incorporating specific definitions into employment agreements.
“Employers can—and should—define in the employment contract what a week is, especially for those with variable work patterns,” he said. This ensures consistency in calculating leave entitlements and helps reduce disputes.
When it comes to public holidays, another grey area emerges around the concept of “otherwise working days.” As Witt explained, “Whether an employee is entitled to time and a half and an alternative holiday depends on whether the day is one they’d otherwise work. But for staff with flexible schedules, that’s often unclear—and ripe for manipulation.”
Again, employers can address this pre-emptively by outlining a clear formula, Witt outlined.
“You could agree in the employment contract that, say, if an employee worked more than 50% of Mondays in the last six months, then Mondays will be treated as otherwise working days. It’s a practical step that removes doubt.”
Another source of confusion lies in the calculation of leave payments—especially for returning parents. While employees continue to accrue leave while on parental leave, Witt told HRD their payments can be severely reduced.
“If they’ve only been back at work for two months, then their annual leave is calculated based on two months of pay, not 12. It’s not much at all,” he noted.
Employers who want to do better can put more generous policies in place.
“There’s nothing to stop an employer from saying ‘We’ll treat you as if you were working full-time during parental leave when calculating your pay.’ That can be embedded in employment agreements or policies,” Witt suggested.
One of the most common traps involves casual employee classification, Witt concluded.
“If someone regularly works Mondays, they’re likely not casual—even if you call them that. And if you’ve been paying 8% instead of giving them time off, you could be liable for both.”
To avoid these risks, he offers this simple but crucial advice: “The time and money you invest upfront to inform yourself or seek capable advice is always worth it. It’s much cheaper than litigation or backpay obligations.”
