New Zealand has approved sweeping changes to its workplace leave laws, with Parliament passing the Employment Leave Bill, a reform the Government says will simplify leave entitlements for both employers and employees.
According to a report by Stuff, the legislation, which passed its third and final reading on Wednesday, will replace the long-criticised Holidays Act and introduce an hours-based system for calculating annual and sick leave.
Workplace Relations and Safety Minister Brooke van Velden said the Government had prioritised replacing what she described as a flawed system. “Simple and straightforward, so that employers have confidence in their calculations, and employees have confidence they are being paid correctly,” as quoted by Stuff.
Under the new law, employees will begin accruing annual and sick leave based on their standard hours of work. Full-time workers will accrue annual leave at a minimum rate of 0.0769 hours for every standard hour worked, equivalent to four weeks of leave each year and sick leave at 0.0385 hours per standard hour, equivalent to 10 days annually, Stuff has reported.
The reforms also allow employees to access annual, sick, bereavement and family violence leave from the first day of employment.
According to Stuff, workers who perform irregular or casual hours will receive a 12.5% leave compensation payment for those hours instead of accruing leave. In addition, employees will be able to cash out up to 25% of their total annual leave balance each year, giving those with larger leave balances greater flexibility.
The legislation also removes the annual leave payment penalty for employees returning from parental leave, ensuring they are no longer disadvantaged when calculating leave payments.
Describing the significance of the reform, van Velden said, “Kiwis have been asking Governments to do something about this legislation for years, and in particular they have been asking for an hours-based accrual system,” Stuff has quoted.
She added that previous governments had failed to deliver the changes. “Successive governments have put it on the to-do list, but nothing came to fruition. This Government has listened, and I am proud that this reform has finally been delivered,” as quoted by Stuff.
The Ministry of Business, Innovation and Employment (MBIE) will publish guidance once the legislation receives Royal Assent, while businesses and payroll providers will have 24 months to update payroll systems and employment agreements to comply with the new rules.
During the select committee process, supporters of the bill argued that the reforms would simplify payroll calculations, reduce compliance errors and provide greater clarity for modern workplaces. They also said the new 12.5% leave compensation payment offered a practical alternative for employees working additional or irregular hours, while immediate access to bereavement and family violence leave strengthened worker protections, Stuff has reported.
However, the legislation faced strong opposition from Labour, the Green Party and worker advocacy groups.
Labour argued the bill was “precision-engineered” to disadvantage vulnerable workers, claiming that linking leave entitlements solely to standard hours could result in employees performing the same work receiving different leave benefits, Stuff has reported.
Critics also maintained that financial compensation should not replace paid time off and opposed calculating sick leave based on hours worked, describing it as an essential health entitlement.
The Green Party argued the reforms would disproportionately affect lower-income workers, women, Māori, Pasifika, young people and migrant workers, warning that reduced sick leave for many part-time employees could increase financial pressure on families with caregiving responsibilities, as reported by Stuff.
Opposition parties also criticised the policy development process, alleging that ministry officials consulted extensively with employer groups and payroll providers while excluding worker representatives from key discussions.