Holidays Act Review

The purpose of the Holidays Act Review

The Government established the Holidays Act Taskforce to suggest improvements to the Holidays Act, following a joint request from unions and employers.

The Taskforce was asked to make recommendations on options for a clear and transparent set of rules for providing entitlements to, and payment for, holidays and leave.

The Taskforce’s objectives were to:

• recommend changes that address the high degree of ambiguity that has made the Holidays Act difficult to understand and implement for employers
• make it easier for employees to understand their entitlements.

The Taskforce’s recommendations

The Holidays Act Taskforce made 22 recommendations which were jointly agreed to by union and business representatives. The Government has accepted the Taskforce’s recommendations.

The new legislation that will implement the Taskforce’s recommendations will provide clear methods that employers can use to accurately calculate and pay leave entitlements. It will also include some changes to employees’ leave entitlements and introduce greater transparency to ensure employees are fully informed about their leave entitlements.

The recommendations include: 

Clear methods, formulas and tests

• New methods that employers must use to calculate the amount of leave entitlement an employee uses when they take leave. This will include a formula for calculating leave for employees with variable working arrangements.
• New leave payment formulas and definitions to provide greater clarity about what payments must be included in the calculations. This will include a new definition of gross earnings and a new Ordinary Leave Pay calculation to replace Ordinary Weekly Pay and Relevant Daily Pay. 
• New eligibility tests for Family Violence, Bereavement and Sick leave.
• A new ‘Otherwise Working Day’ test for determining days on which these entitlements apply. 
• A new test for when an employee may receive their annual holiday entitlement on a ‘Pay-As-You-Go’ basis and clear rules for reviewing whether it can continue to be used throughout the course of employment.

Increased access to some leave entitlements

• From their first day of employment, eligible employees will be entitled to bereavement leave and family violence leave, and to begin accruing sick leave. Other employees will be eligible after 3 months if they meet the new tests.
• Employees will be able to take annual holidays on a pro-rata basis in advance of their entitlement.
• Bereavement leave will be expanded so that employees can access 3 days of leave for more types of family members.
• Employees returning from parental leave will be paid according to the normal rules for annual holidays, rather than their pay only being based on their average weekly earnings over the last 52 weeks.

Greater transparency for employees

• New, clearer requirements related to the process for having a closedown period. 
• Additional record-keeping requirements to ensure employers have the data required to accurately complete the calculations and tests. 
• A requirement to provide a pay statement in each pay period to provide greater transparency about leave and pay for employees.

Read the Minister's announcement accepting the Taskforce’s recommendations(external link)

Read the full Holidays Act Taskforce final report [PDF, 1.4 MB]

Next steps – implementing the Taskforce’s recommendations

Detailed policy design work has been completed

The Ministry of Business, Innovation and Employment (MBIE) has completed a policy design process to develop the details required to implement the Holidays Act Taskforce’s recommendations in legislation.

To support this process, MBIE brought together a working group of stakeholders including payroll system providers, payroll practitioners working in employer organisations, business, and unions. 

The group has contributed their insights into the practicalities of implementing the recommendations in payroll systems, and across a variety of complex employment environments. This will mean that the details will have been examined from a range of perspectives before they are drafted into law.

The Bill that implements the recommendations will include some refinements to the Taskforce’s recommendations.

These will help to ensure the new rules and processes for calculating leave entitlements and payments are definitive, clear, and logical, can be systematised, and are workable in all employment situations.

All the refinements are consistent with the intent of the Taskforce’s recommendations.

Drafting of the Bill is underway

Drafting of the legislation that will implement the Taskforce recommendations and refinements is now underway. It is important that time is taken to draft legislation that reflects the Taskforce’s recommendations and provides the clarity and certainty employers, the payroll sector and employees want and need.

A Bill will not be introduced before the 2023 general election. Taking the time to get it right first time will help to minimise the risk of implementation challenges and future compliance issues.

Having your say

After the Bill is introduced and has had its first reading in Parliament it will be referred to select committee. 

Read more about the legislative process(external link) — New Zealand Parliament

The select committee process will provide the opportunity for all stakeholders to have their say on the changes to the Holidays Act. Members of the public will be able to make submissions to the select committee.

The select committee will consider what submitters have told them about the Bill, along with advice from government agency officials, and then share their findings and recommendations with Parliament.

Read more about when and how to make a submission to a select committee and what happens(external link) — New Zealand Parliament

Read more about the role of select committees(external link) — New Zealand Parliament

Once the Bill is open for submissions a link will be published on the New Zealand Parliament website. 

Make a submission(external link) — New Zealand Parliament 

What businesses can do to prepare

Until the select committee process is complete and the new legislation has been passed, the technical details of the changes to the rules for providing and calculating leave entitlements and payments cannot be confirmed. 

In the meantime, businesses may wish to consider what the implementation process could look like for them and begin to plan accordingly. This may involve thinking about the internal and external payroll resources that might be required to:

• understand the new legislation
• identify the impact of the changes on the payroll and business systems
• plan for developing and testing system changes that meet the new legislative requirements (once confirmed)
• plan a successful implementation.

Implementation support that will be available for employees, employers and payroll providers

Once the Bill receives Royal assent, there will be an implementation period before it comes into force. The implementation period will provide time for employers and payroll providers to understand the new legislation and how to comply with it. It will also provide time for changes to payroll and other business systems to be made.

MBIE intends to begin publishing and disseminating general guidance for employees, employers and payroll providers as soon practical after Royal assent with further information and tools available prior to the Bill coming into force. Once the Bill is passed, MBIE will engage with stakeholders to ensure guidance and tools are fit for purpose. 

During the implementation period, MBIE will also conduct a range of proactive activities to raise awareness of the new legislation, including through online communication channels and direct stakeholder engagement. 

Employers’ obligations to remediate remain

Until the new legislation to implement the Taskforce’s recommendations comes into force, all of the existing rules still apply. This means that employers still need to comply with the current Holidays Act, and ensure they are providing the correct entitlements and payments to employees. Additionally, employers retain an obligation to remediate employees for historical underpayments that have occurred due to non-compliance with the current Holidays Act. 

Read more about leave entitlements under the current Holidays Act(external link) — Employment New Zealand

Access information about Holidays Act non-compliance and remediation(external link) — Employment New Zealand

Who you can contact

If you have questions about the Holidays Act Review or the Taskforce, email:

holidays.act.review@mbie.govt.nz

If you have questions about whether your current or former employer has calculated your leave payments correctly or if you believe you may be eligible for a remediation payment, contact your employer in the first instance. Many employers have webpages about their Holidays Act remediation programmes which include contact details for employees.

If your employer is unable to answer your questions, if you have other questions about leave entitlements or payments, or if you wish to make a complaint about your employer, contact Employment New Zealand:

Send a query via the Employment New Zealand website(external link)

Phone: 0800 20 90 20

Background documents

Establishing the Taskforce

(The Minister for Workplace Relations and Safety made a minor amendment to paragraph 9 of the terms of reference.)

Holidays Act Taskforce members

The table below outlines the individual members of the Holidays Act Taskforce and which organisation they were representing.

Holidays Act: Issues paper

In August 2018, the Taskforce published an issues paper that set out its understanding of the key issues that employers, employees, and payroll providers face in trying to implement the Holidays Act 2003. The Taskforce considered feedback from stakeholders on the issues paper as it developed its final recommendations.

Interim report from Holidays Act Taskforce

In December 2018 the Taskforce provided an interim report to the Minister for Workplace Relations and Safety on progress with the review of the Holidays Act.

Accepting the Taskforce’s recommendations