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 three 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 three 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 progressing

The Ministry of Business, Innovation and Employment (MBIE) is progressing the detailed policy design work required to implement the Holidays Act Taskforce’s recommendations in legislation.

This process has brought together stakeholders from across government, the payroll sector, business, and unions, who have a range of skills including policy, Holidays Act enforcement and compliance, payroll system provision, payroll practice across a range of employment environments, business analysis, and drafting legislation.

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 across the widest possible range of employment situations.

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

Modelling and testing is also being carried out to provide greater certainty that the new rules and methods are workable in practice.

When the changes are coming and what businesses can do to prepare

The Government is aiming to introduce legislation that will implement the recommended changes to the Holidays Act in mid-2023.

After the Bill’s first reading in Parliament it will be referred to select committee. The Bill will not be passed before the end of the parliamentary term.

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

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 publish guidance and resources as soon as possible after the Bill is passed, to support payroll providers and businesses with their preparations.

Having your say  

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 

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 workers for historical underpayments. 

Tools and resources are available of the Employment New Zealand website:

Holidays Act 2003 [PDF 1MB](external link) — Employment New Zealand

Addressing Holidays Act non-compliance(external link) — Employment New Zealand

Contact the review team

If you have questions about the review or the Taskforce, email Holidays.Act.Review@mbie.govt.nz

If you have any other questions about leave entitlements, contact Employment New Zealand. 

Email us a query(external link) — Employment New Zealand
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