New Zealand’s proposed replacement for the Holidays Act has reached a decisive stage.  On 13 July, Parliament’s Education and Workforce Committee reported back the Employment Leave Bill. The committee recommended by majority that the Bill be passed, although its proposed amendments were agreed unanimously. The Bill is still not law. It has not yet completed its remaining parliamentary stages and may still be amended.

But the reported-back version now gives a much clearer picture of what the new leave system would look like, and who may be worse off.  

The Government’s case for reform is straightforward. The Holidays Act has become notoriously difficult to apply. Employers, payroll providers, public agencies, and even large institutions have repeatedly got it wrong. The result has been years of confusion, litigation, remediation projects, and historical underpayments.  The Employment Leave Bill is intended to fix that by moving away from some of the Act’s more difficult concepts and replacing them with a system based largely on hours.

That sounds simple. But simplicity has consequences.  The real question is not whether the current Holidays Act is difficult. It plainly is. The question is whether the proposed replacement distributes the costs of simplicity fairly.

From Weeks and Days to Hours

Under the current Holidays Act, employees become entitled to at least four weeks’ paid annual holidays after each completed 12 months of continuous employment. Eligible employees also receive 10 days of sick leave in each 12-month period.  The proposed new law would change that structure.

Annual leave would accrue from the beginning of employment at no less than 0.0769 hours for each standard hour. A worker with 40 standard hours each week would therefore accrue about 160 hours over a full year — roughly equivalent to four 40-hour weeks.

Sick leave would accrue at no less than 0.0385 hours for each standard hour. For the same 40-hour worker, that would produce about 80 hours of sick leave each year.

For a conventional full-time worker with stable hours, the practical result may not look dramatically different. The issue becomes harder for people whose work does not fit that pattern.  The Bill divides working time into three main categories:

• standard hours;

• additional hours; and

• casual hours.

Annual and sick leave would accrue on standard hours. Additional and casual hours would not build those leave balances. Instead, those hours would attract a 12.5% leave compensation payment.  That is one of the Bill’s central trade-offs. Some workers would receive cash instead of accruing paid time away from work.

What the Select Committee Changed

The select committee did make meaningful changes.  One of the most important was symbolic but still significant. The introduced Bill described annual leave as paid time away from work. Submitters objected that this weakened the long-standing idea that annual holidays are for recuperation. The committee accepted the concern. The reported-back Bill now restores the language of “rest and recreation.”

That matters. Annual leave is not just another payment calculation. It is a statutory protection for time away from work.

The committee also strengthened the rules for workers whose standard hours cannot be fully identified from their employment agreement. In those cases, the employer and employee would use a notional roster. The revised Bill says that roster must, as far as possible, accurately reflect the intended pattern of standard hours and be kept up to date.  That is not a minor technical point. A notional roster could determine how much leave an employee accrues and when that leave can be taken. If the roster is artificial or outdated, the employee’s leave rights may be distorted.

The committee also addressed a gap in the public-holiday rules. The introduced Bill risked excluding workers who had some contractual working days but also regularly worked other days. The revised version allows the worker’s actual pattern over the previous 13 weeks to be considered for those additional days.

The committee further clarified that employers and employees must make reasonable efforts to agree when annual leave will be taken, and that an employer must not unreasonably withhold consent to taking accrued leave.

These changes improve the Bill. They make it fairer and less brittle than the version first introduced.  But they do not change the basic design.

Some Part-Time Workers Could Receive Much Less Sick Leave

The strongest concern is sick leave.

It would be wrong to say that every part-time worker would lose sick leave. The position is more specific than that.  Under the current Act, an eligible employee receives 10 sick days. Under the Bill, sick leave would be calculated in hours, based on standard hours worked.

That means the effect depends heavily on how a worker’s hours are spread across the week.  Take a worker who works 16 hours a week over two eight-hour days.  Under the current Act, 10 sick days can represent up to 80 hours of paid sick leave, because each sick day is an eight-hour working day.

Under the Bill:       16 hours × 52 weeks × 0.0385 = about 32 hours

That is roughly four eight-hour shifts, rather than 10.  Now take a different worker who works 20 hours a week over five four-hour days.  Under the current Act, 10 sick days represent about 40 hours. Under the Bill, the hourly formula would also produce roughly 40 hours.

So the dividing line is not simply full-time versus part-time. The workers most exposed are those who work part-time hours concentrated into fewer, longer shifts.

That includes some workers in hospitality, retail, care work, cleaning, security, transport, and other rostered industries.

The Bill does provide one important benefit: sick leave would accrue from the start of employment, rather than after the current six-month qualification period. But that does not mean a new employee receives a full sick-leave balance immediately. It builds gradually.

So the change is not all one way. But for some workers, the reduction would be real.

A Short Public-Holiday Shift Could Lose a Full Day in Lieu

The public-holiday change is even clearer.  Under the current Holidays Act, an employee who works any part of a public holiday that would otherwise have been a working day is generally entitled to another full day off.  That can produce generous results. A worker called in for a short shift may still receive a full alternative holiday.

The reported Bill would change that to an hour-for-hour entitlement.  If a worker works two hours on a public holiday, they would generally receive two hours of alternative leave, not a full day.

For someone who works a full shift, the difference may be modest. For someone called in briefly, asked to cover part of a shift, or required to deal with an urgent issue, the difference could be significant.  Again, the new rule is simpler. It is also plainly less generous in those cases.

Cash is Not the Same as Leave

The Bill’s treatment of casual and additional hours deserves close attention.  For those hours, the employee would receive a 12.5 percent leave compensation payment instead of building annual and sick leave.  Some workers may prefer that. Immediate cash is not meaningless, especially for people under financial pressure.

But cash and leave are not the same thing.  A worker who receives the payment does not build a sick-leave balance from those hours. If they later become ill, the earlier payment may not protect them from losing income that week. Nor does it create a future period of paid annual leave.  This is where classification becomes crucial.

If hours are classified as standard hours, they build annual and sick leave. If they are classified as additional or casual hours, they attract cash instead.  That creates an obvious pressure point. Employers and employees may have different interests in how hours are described. A worker may see regular work as part of the real job. An employer may see it as additional or casual.

The committee’s stronger notional-roster rules help, but they do not eliminate the risk. Some of the hardest disputes under the new law may not be about arithmetic. They may be about whether the hours were classified correctly in the first place.

Commission and Incentive Earners May Receive Less

The Bill may also reduce leave pay for some workers whose ordinary income depends heavily on commission, bonuses, or incentive payments.

The current Holidays Act often requires holiday pay to reflect ordinary or average earnings. That can include some variable payments where they are part of what the employee would normally earn.  The new Bill moves toward more standardised hourly calculations. It excludes productivity and incentive payments, including commission, from several relevant components of leave pay. There are special rules for some arrangements, so the impact will depend on the worker’s contract and pay structure.

Still, the broad risk is clear:  A worker with a modest base salary and occasional bonus may not be badly affected. A salesperson whose commission forms a large part of ordinary income may be in a very different position.

This is an area where examples matter. The public debate should not rely on slogans. It should test real payroll scenarios.

The Bill also Contains Genuine Gains

The reform is not simply a cut to leave-rights.  There are real gains.  Annual leave and sick leave would begin accruing from the start of employment. Bereavement leave and family violence leave would also be available from the start of employment, including for employees working casual hours.

Leave would be easier to take in hourly or part-day units. That may help workers who need flexibility, particularly around medical appointments, family responsibilities, or unpredictable personal circumstances.

The Bill would also require employers to provide itemised pay statements. That is a major transparency improvement.  Workers often cannot identify wage or leave errors if they cannot see how their pay was calculated.  For employers and payroll providers, the attraction is obvious. The current Act has produced widespread non-compliance not only because of bad faith, but because the system is genuinely difficult to administer. A clearer hourly framework may reduce errors, disputes, and costly remediation exercises.  That should not be dismissed.  But neither should the cost be hidden.

The Bill improves administrative certainty by changing the substance of some entitlements. The fact that a rule is easier to calculate does not prove that it is fairer.

Historical Underpayments Remain Unresolved

The Bill also deals with historical Holidays Act liabilities.  That matters because many employers have underpaid leave entitlements under the current Act. Some of those underpayments arose because payroll systems could not handle the Act’s requirements. Others may have arisen from poor compliance, bad assumptions, or a failure to take leave obligations seriously.

The Bill proposes a process for resolving some historical liabilities from the six years before the current Act ceases to operate.  The select committee added safeguards. Employers would have to notify current staff, make reasonable efforts to contact former employees, publish notices through prescribed media, and request updated contact and bank details.

If an employer fails to make the required effort to contact a former employee, that employee’s claim may no longer be suspended. The committee also removed a proposed power to set a minimum amount below which no remediation payment would be required.  Those changes are useful.  But the central accountability issue remains: how will compensation be calculated?

If the process pays workers what they were legally owed under the Holidays Act, it may provide an efficient path to resolution. If it produces only an administratively convenient approximation, workers may receive less than the law originally promised them.

That question cannot be answered fully until the regulations are known.

The School Payroll Exception Deserves Scrutiny

Most of the new law would commence two years after Royal assent.  But the Bill allows a much longer transition for employees of State-school boards who are paid through the central payroll service. Their commencement dates could be set separately, with the new law applying no later than the tenth anniversary of Royal assent.  A possible decade-long transition is significant.

It raises obvious questions. Why can some parts of the education payroll not meet the general timetable? Will different groups of workers remain under different leave systems for years? What does that say about the complexity of the new system itself?

If the law is designed to fix payroll complexity, the possibility of a ten-year exception for a major public payroll system deserves more public explanation.

The Bottom Line

The select committee has improved the Employment Leave Bill.  It restored the protective purpose of annual leave. It strengthened notional-roster rules. It closed some gaps in the public-holiday provisions. It improved the historical-remediation process. It made the Bill clearer and less vulnerable to obvious unfairness.  But the central bargain remains.

The Bill would replace weeks and days with hourly accrual. Annual and sick leave would attach mainly to standard hours. Casual and additional hours would receive cash instead of building leave. A full alternative holiday would become an hour-for-hour entitlement.  Some workers would benefit from earlier access, more flexible leave-taking, clearer records, and more predictable calculations.  Others could receive less paid time away from work.

The most exposed groups appear to include part-time workers who work fewer, longer shifts; workers called in briefly on public holidays; employees whose income depends heavily on commission; and workers whose regular hours are classified as additional or casual rather than standard.

The answer to the headline is therefore yes: some workers could still lose out.

But the effect will not be universal. It will depend on the worker’s roster, contract, pay structure, and classification of hours.

Parliament now has to decide more than whether the new system is simpler. It has to decide whether the price of that simplicity is being paid by the right people.