A new Employment Leave Bill has been introduced to replace the Holidays Act 2003, with the new regime expected to take effect in 2028 after a year’s transition period. The proposed reforms are aimed at simplifying one of New Zealand’s most difficult employment law regimes, which has been notoriously hard for employers to apply in practice – particularly where employees work variable hours, shifts, overtime, or casual arrangements.
Some of the main proposed changes include:
- Hours based accrual: Annual leave and sick leave will accrue on an hours-based balance, from day one of employment, marking a shift away from the current weeks/days model. This change will allow employees more flexibility to take part-days leave.
- Cashing up leave: Employees will be able to request to cash up to 25% of their total annual leave balance every 12 months, giving greater flexibility than under the current regime.
- Leave compensation: The Bill introduces a Proposed Leave Compensation Payment of 12% for additional hours or casual hours worked. Any hours worked on top of contracted hours will not accrue annual or sick leave, instead workers will receive an upfront payment of 12.5% for each additional hour worked. Casual employees will receive a 12.5% leave payment for each hour worked, and will not accrue any annual leave or sick leave.
Top tip: Start planning early. Although the law has not changed yet, employers should begin thinking now about how the proposed regime will affect payroll systems, time-sheet or time-recording practices, employment agreement clauses, and workforce arrangements involving casual employees or employees who work extra hours. how these proposed changes will impact their businesses. Early preparation will make the transition much easier once the new legislation is passed.
If you would like advice on how these proposed changes could affect your business, or help preparing for the transition, talk to the Ford Sumner Employment Team today.