NZ Holidays Act Replacement Announced
The NZ Government announced its "out with the old and in the new" policy details on the new Holidays Act replacement.
Our current Holidays Act is a broken system and has been for a long time, and I am hoping for something that is going to be a lot more workable for the average business owner. But I am not holding my breath on that. Is this the saviour of our payroll pain, or another sour lemon we all end up sucking on?
Some of the key changes announced include:
*️⃣A shift to hours-based accrual for sick and annual leave: workers will benefit from greater flexibility to take only the hours they need off work rather than a day, employers will benefit from a simpler system.
😳I wonder how they are going to determine how many hours to pay for a full day off or a full week off, when employee works flexi hours..
*️⃣A shift to pro rata sick leave: employers will benefit from a fairer system where sick leave entitlements are proportionate to hours actually worked.
😳This never made sense in any way, giving 10 days sick leave to employees who meet the work test, whether they work a day a week, or one week a month, so this is a good change - pro-rata sick leave based on what is usually worked.. Except its being changed to hours instead of days - so as above.. how many hours will constitute a 'day' off sick..
*️⃣Leave Compensation Payment for casual employees: casual employees will generally see an increase to their pay by receiving an upfront payment of 12.5% for each hour worked, instead of accruing annual and sick leave or receiving the current 8% Pay-As-You-Go payment.
😳 why 12.5%? A 4% pay increase to recognise leave entitlements they are not necessarily entitled to? Would love to see where that calculation came from... Again further cost to business owners who employ true casuals who currently don't have sick leave as they never meet the work test. And how do you determine when to pay them and what to pay them for sick leave when they are casuals?
*️⃣Leave Compensation Payment for additional hours worked: any hours worked on top of contracted hours will not accrue annual or sick leave but workers will receive an upfront payment of 12.5% for each additional hour worked.
😳 Wow. Just wow. I am not sure what to say about this one. How many businesses do not have set contracted hours? (ie my team have an agreed minimum hours each week but work when there is work to do, and go home when done. Hospitality is the same, set start shift, no set finish hours at end of day). Apparently employers will benefit due to removing the complexity of having to track leave balances beyond contracted hours. Ek...
*️⃣Family violence and bereavement leave: employees will now be able to access bereavement leave and family violence leave from the first day of employment.
😳 This one will be interesting... further costs to include in the payroll budget for business owners.
*️⃣Returning from parental leave: new parents will now receive their full pay for annual leave when they return from parental leave, a major shift from the status quo.
😳 Great for the employee, the business owner wears the cost of this one. This change should make it easier from a management of leave perspective.
*️⃣Mandatory pay statements: employers will now be required to provide clear pay statements each pay period, itemising pay and leave in a way that’s transparent and easy to understand.
😳 Most employers provide payslips and agree this should be mandatory. If our act is easy to understand, the payslips will reflect it. If its not, as is the current state of play, then it same goes.
*️⃣Cashing up annual leave: Where a worker has a large annual leave balance there will be more flexibility to cash it up. Currently they can only request to cash up one week in each year. Now they will be able to cash up 25% of their total annual leave balance each year. Employers who agree to cashing up will benefit from reduced leave liability.
😳 I wonder how this one is going to be managed. And at what point is the 25% taken from...
*️⃣Removal of leave accrual during ACC or unpaid leave
😳This aligns entitlements with time actually worked and reduces undue cost pressures on businesses.
It has certainly bought up way more questions than answers for me at this point, so can't wait to find out more details.
Article by Di Crawford-Errington
Published 23 Sep 2025