The New Zealand Government has confirmed that fixing the Holidays Act is a top priority. For years, both workers and employers have faced confusion and compliance challenges with the current law — and the upcoming Holidays Act Reform aims to change that.

Why the Change?

Complex rules have led to miscalculations, underpayments, and unnecessary admin headaches. The government aims to simplify these rules to make them fairer and easier to apply.

Proposed Changes:

In August 2025, Cabinet approved plans to replace the current law with new employment leave legislation.

Key changes for the Annual and Sick leave:

  • Leave will accrue in hours: Leave will not be accrued as lump-sum days. Annual and sick leave will start accruing from the first day of work, and employees will be able to take leave in hours (even part-days).
  • Sick leave will match hours of work: It will build up in proportion to how many hours an employee actually works – so part-time and full-time workers get fairer entitlements.
  • Casual and extra hours will come with a 12.5% leave compensation payment in lieu of annual and sick leave accrual.
  • Leave pay rates will be simpler: All types of leave will be paid at the same hourly rate, based on your usual pay. Fixed payments (like regular bonuses or allowances) will continue during leave.
  • When an annual leave is taken after parental leave, it will be paid like any other annual leave (not at a reduced rate as it can be currently).

Changes proposed to Other leave systems include:

  • A shift to hours-based accrual for alternative holidays.
  • A new “Otherwise Working Day” test for public holidays.
  • The ability to take part-days of all types of leave.  

What Happens Next

The new legislation will be drafted and introduced to Parliament, followed by a Committee review where the public can have their say.

Once passed, there will be a two-year transition period (24 Months) to give employers, payroll providers, and HR teams time to adjust systems and policies.

Until then, the current Holidays Act still applies, and businesses must continue to meet all existing obligations – including fixing any past underpayments.

Note: Oracle will be republishing a blog and a position statement in this regard, once the bill is passed in parliament.

Our Position Statement for 2025 is updated with the announcement of the Holiday Pay Reform. We encourage our customers to review the latest statement to keep up to date. The updated Position Statement can be found on My Oracle Support, Doc ID  2973834.1