EMA backs Employment Leave Bill as step towards fixing Holidays Act

Employers and Manufacturers Association (EMA) says the introduction of the Employment Leave Bill to Parliament marks a long-awaited step toward resolving ongoing issues with New Zealand’s Holidays Act.

The EMA says the proposed reforms could bring much-needed clarity to employers and employees after more than a decade of frustration with the current system.

Head of advocacy and strategy Alan McDonald says it was encouraging to see progress after several stalled attempts to overhaul the legislation.

“Successive governments have acknowledged the problems, but this is the first time in years we’ve seen meaningful progress,” McDonald says.

“It’s good to see the reforms maintaining momentum as this overhaul has been needed for a very long time.”

A key change in the bill is a shift to a standard-hours-based calculation for leave, which McDonald says would significantly simplify the system.

“It significantly simplifies the system for both employers and employees, which is what everyone has been asking for. But there’s still a bit for employers to get their heads around, particularly how standard hours apply to existing arrangements and how employment contracts may need to be updated.”

The bill proposes a two-year implementation window, which the EMA says will give businesses time to adapt their systems, revise employment agreements and manage the transition to the new framework.

However, McDonald says some details still require clarification.

“In particular, how existing leave balances will be treated, how built-up entitlements will roll over to the new system, and how the rules apply to people with variable or commission-based earnings. Those transition details matter, and employers and employees need certainty on how to manage those changes.”

The association also welcomes plans to introduce a pro-rata approach for sick leave entitlements for part-time workers.

“Ten days’ sick leave for all workers, regardless of whether they work one shift or five, was introduced as a Covid-era measure that we didn’t support at the time. Moving to a pro-rated system for part-time workers is fairer and better reflects the reality of modern work,” McDonald says.

The bill also includes a Leave Compensation Payment (LCP) designed to offset changes affecting part-time and casual workers, although McDonald said it would introduce another element employers will need to manage.

With the legislation now before Parliament and submissions expected to open soon, the EMA is encouraging its members to support the reforms and participate in the submission process.

“Now that we have a workable solution on the table, we want to see the base settings stay in place long enough for the new system to bed in,” McDonald says.

“The old rules were universally seen as unworkable, but no one wants to finally fix it only to have it quickly changed again.”

Once the bill passes its first reading, submissions will be invited through Parliament’s Education and Workforce Select Committee.

Related employment law changes

The leave reforms come as other employment law changes recently took effect in New Zealand. Amendments to the Employment Relations Amendment Act 2026 came into force on 21 February, introducing several updates affecting workplace relationships and compliance.

Among the changes is a new “gateway test” designed to clarify whether a worker should be classified as an independent contractor or an employee. The amendments also allow remedies awarded in personal grievance cases to be reduced, potentially by up to 100 percent, if an employee’s own behaviour contributed to the situation.

Ashlea Maley from Peninsula New Zealand says the contractor test aims to provide greater certainty for businesses engaging contractors.

“If the true nature of the relationship skews towards an employment relationship, then this can lead to a hefty back-pay and legal risks. The business may be held liable for extra costs including back payment of wages, leave entitlements and it also means that a personal grievance could be raised,” Maley says.

The amendments also remove the previous “30-day rule”, which required new employees to be employed under the terms of a collective agreement for their first 30 days.