Entitlements accrue from day one, based on hours worked
- For both annual leave and sick leave. So rather than waiting 12 months for annual leave or 6 months for sick leave, accrual starts immediately, and proportionally to hours worked.
- Example: someone working full-time (40 hours/week) would accrue 0.0769 hours annual leave per hour worked, and 0.0385 hours sick leave per hour. That equates to 160 hours of annual leave (=4 weeks) and 80 hours (=10 days) sick leave over a year.
- Instead of accruing leave, casual workers will receive a higher leave compensation payment: 12.5% of each hour worked. The current “pay-as-you-go” leave compensation (8%) will be replaced for them.
- Additional hours worked on top of contracted hours also get the 12.5% payment rather than accruing more leave.
- Sick leave can be taken in hours (not forced to use a full day when only part of it is needed) to better match how people work.
- Bereavement leave and family violence leave will be accessible from day one of employment.
- New parents returning from parental leave will get their full pay for annual leave when they return.
- Workers with large annual leave balances will have the option to request cashing up (converting leave to money) up to 25% of their total annual leave balance per year.
- Employers will be required to provide clear, itemised pay statements each pay period that show leave and pay entitlements/pay clearly.
- After the new Employment Leave Act is passed, there will be a 24-month implementation period to allow businesses and payroll providers to adjust. Until then, the old Holidays Act remains in force.
Overall, these reforms represent a long-overdue simplification of how leave and entitlements are calculated. They should eliminate many of the issues NZ businesses face today, particularly when an employee’s hours or pay structure changes. From day one, both employees and employers will have a clear, consistent method for accruing and using leave. Other changes, such asreturning parents being able to take leave at full pay, will also removeunwelcome surprises. Employers, however, will need to review payroll systems to ensure they can manage the new rules (most cloud based providers will use the 24 month lead in to get prepared), revisit employment contracts where high variable or performance-based pay has previously inflated annual leave entitlements, and consider the cashflow impact on your business if you have a high volume of casual workers.
Before passing, the Act will go through normal parliamentary procedure to allow interested parties to offer their thoughts - the Minister is also very keen to open her door and have broad cross-party support to ensure this is an endurinng legilsative change, so there is potential for revisions / definitions refinement before this is set into law.
If you have any questions, or would like to discuss how this might impact your business please feel free to reach out.
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