Colin Ambler/cvnznews.com
The Government has delivered a major overhaul of New Zealand’s leave entitlements system, with the Employment Leave Bill passing its third and final reading this week. Workplace Relations and Safety Minister Brooke van Velden says the reform finally replaces the long‑criticised Holidays Act with a simpler, more transparent framework that benefits both workers and employers.
Minister for Workplace Relations and Safety
For years, businesses have struggled with the complexity of the Holidays Act, facing costly compliance issues and uncertainty around how to correctly calculate leave. Employees, meanwhile, have often been left unsure whether their entitlements were being paid accurately. Van Velden says the new legislation directly responds to what New Zealanders have been asking governments to fix for more than a decade.
A key change is the shift to an hours‑based accrual system. Instead of the previous formula‑heavy approach, annual and sick leave will now accrue in direct proportion to an employee’s standard hours of work. All major leave types — annual, sick, bereavement and family violence — will also be available from a worker’s first day on the job.
The Bill introduces a single hourly rate for paying leave, removing the confusion of multiple calculations. Casual and additional hours will now receive a 12.5% Leave Compensation Payment rather than accruing leave, and mandatory pay statements will make entitlements easier to understand.
Workers will gain greater flexibility too, with the ability to cash up 25% of their annual leave balance each year. The legislation also removes the long‑criticised parental‑leave penalty, ensuring returning parents are not disadvantaged.
Van Velden says the milestone reflects extensive input from payroll experts, businesses, and workplace specialists who have long advocated for a simpler, more durable system. The new framework includes a 24‑month transition period for employers and payroll providers, followed by an additional year to update employment agreements.
MBIE will publish detailed guidance on the Employment New Zealand website once the Bill receives Royal assent, giving workplaces a clear roadmap for adopting the new system.
