After years of stops and starts towards reforming the Holidays Act 2003, Parliament has finally passed the Employment Leave Bill (Bill) following the Bill’s third and final reading.
To understand some of the key changes introduced by the Bill, read our previous article here.
The Bill is set to come into effect two years after Royal Assent to give employers sufficient time to implement the changes. Some parental leave-related provisions will take effect earlier, on 1 July 2027.
The Labour and Green parties both opposed the Bill, which, with an election looming, raises questions about the longevity of these ‘overdue’ reforms.
Labour and Greens Dissent
The Labour and Green parties both opposed the Bill, arguing that it does not reflect the complexity of work found in New Zealand, and will ultimately disadvantage employees.
A prominent critique of the Bill relates to the fundamental shift in how employees will accrue leave – leave will accrue on a pro rata basis in accordance with standard hours worked from the first day of employment, as opposed to accruing leave in accordance with all hours worked.
Under the Bill, leave will only accrue on an employee’s standard hours, that is, the hours they are contracted and required to work. Any hours worked on top of that (called additional hours) or hours worked on a casual basis (where neither employer or employee is obliged to offer or accept work) will not count towards annual leave entitlements.
Labour’s view is that this change risks entrenching unequal access to paid leave for part-time, casual, and otherwise vulnerable workers, and ultimately makes accessing leave more difficult.
Meanwhile, the Greens say the Bill will disproportionately and negatively affect women, young people, Māori, Pasifika, and migrant workers.
Proponents of the Bill have argued it will resolve complex, historical compliance issues, saying that distinguishing between standard, additional, and casual hours provide necessary structural clarity for modern workplaces.
It has also been argued that a consistent leave payment method, where every hour of leave is paid at a predictable hourly rate, simplifies payroll administration and reduces employer errors.
What next?
While the new regime is not yet in force, employers need to consider preparing for the changes as soon as possible. Two years is not a long time when overhauling Employment Agreements and payroll systems.
In particular, employers should consider:
- whether their employment agreements define standard hours with sufficient precision;
- whether existing working arrangements correctly distinguish between the three new hour types of standard, additional, and casual hours; and
- whether payroll systems are capable of supporting hours-based accrual and correctly processing leave compensation payments.
With an election looming, it is yet to be seen whether all aspects of the Bill will stand the test of time. If the pendulum swings towards a Labour-Green coalition, it may be that changes to leave accrual, for example are undone.
If you have questions about the proposed changes or other workplace law matters, contact our Workplace Law team today.
