{"id":51503,"date":"2025-10-02T09:50:20","date_gmt":"2025-10-02T09:50:20","guid":{"rendered":"https:\/\/employmenthero.com\/nz\/?post_type=news&p=51503"},"modified":"2025-12-01T07:14:53","modified_gmt":"2025-12-01T07:14:53","slug":"nz-holidays-act-reform-leave-changes-2025-2026","status":"publish","type":"news","link":"https:\/\/employmenthero.com\/nz\/news\/nz-holidays-act-reform-leave-changes-2025-2026\/","title":{"rendered":"NZ Employers Face Big Changes As Sick Leave, Holiday Pay Set For Overhaul"},"content":{"rendered":"\n
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New Zealand’s long-awaited Holidays Act reform is set to radically shift how sick leave and time off are calculated and paid, with significant implications for small businesses.<\/strong><\/p>\n\n\n\n

New Zealand\u2019s complex leave laws are finally getting a shake-up, and for thousands of small business owners, it\u2019s about time.<\/p>\n\n\n\n

The government\u2019s long-promised overhaul of the Holidays Act, which has confused employers and frustrated employees for years, is now expected to land in Parliament by the end of 2025. If passed, it will force a sweeping recalibration of how Kiwis take sick leave and how employers calculate entitlements like holiday pay.<\/p>\n\n\n\n

According to 91±¬ΑΟ\u2019s Employment Counsel Sanam Ahmadzadeh Salmani, the reform will mark a significant improvement in clarity and fairness, but it won\u2019t be an easy adjustment. “The current system is incredibly complicated and often overwhelming especially for small businesses that don\u2019t have an in-house HR or payroll expert to navigate the legal minefield. Even well-meaning employers can get tripped up by the confusing formulas and inconsistent rules.” Salman explains.<\/p>\n\n\n\n

The biggest overhaul? A move away from the notorious \u201cgross earnings\u201d formula and toward a more straightforward weekly earnings model. Right now, calculating holiday pay can involve two or more averaging methods, often leading to confusion, disputes, and payroll errors. The new approach aims to simplify this with a fixed weekly pay calculation that better reflects a worker\u2019s usual income.<\/p>\n\n\n\n

And it\u2019s not just holiday pay that\u2019s changing. Under the proposed law, sick leave, bereavement leave, and family violence leave will be calculated and paid based on actual days worked, rather than a notional or averaged amount. It\u2019s a big win for workers with variable hours, but one that may leave some SMEs scrambling to adjust their payroll systems.<\/p>\n\n\n\n

One particularly thorny issue being addressed is the so-called \u201cparental leave penalty,\u201d where employees returning from parental leave currently lose their annual leave pay entitlement. The proposed changes will fix this, allowing returning parents to retain their full leave entitlements.<\/p>\n\n\n\n

So what should business owners do now?<\/h2>\n\n\n\n

Salman advises employers to start by reviewing their payroll processes and checking whether their systems can handle the more detailed data input the new law will require. For many SMEs using legacy systems or manual calculations, this will be a critical first step.<\/p>\n\n\n\n

While the law is still being finalised, the Ministry of Business, Innovation and Employment (MBIE) is expected to provide a 12 to 18-month lead-in period to give businesses time to adjust. Even so, it won\u2019t be a plug-and-play fix.<\/p>\n\n\n\n

\u201cThink about how this impacts your business, now\u2019s the time,\u201d Ahmadzadeh Salmani says.”These changes go beyond technical adjustments. Employers will need to understand who is managing their payroll and how this is being done. It\u2019s about interpreting the legislation correctly and understanding the nuances between employment law and payroll.\u201d<\/p>\n\n\n\n

For employers who\u2019ve been burned by payroll audits or compliance confusion in the past, the reforms may feel like both a blessing and a burden. But the end goal is a simpler, fairer system for everyone and for SMEs, that\u2019s an opportunity to build trust and transparency into how they manage their people.<\/p>\n\n\n\n

Key changes SMEs need to know:<\/strong><\/p>\n\n\n\n

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  • A lead-in period of 12\u201318 months expected for implementation<\/li>\n\n\n\n
  • Leave entitlements (including sick and bereavement leave) to be paid based on actual hours worked<\/li>\n\n\n\n
  • The \u201cparental leave penalty\u201d to be removed, preserving leave entitlements for returning parents<\/li>\n\n\n\n
  • A lead-in period of 12\u201318 months expected for implementation<\/li>\n<\/ul>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

    New Zealand\u2019s Holidays Act reform will simplify leave, fix payroll confusion, and remove the parental leave penalty – big changes ahead for SMEs<\/p>\n","protected":false},"author":430,"featured_media":51505,"template":"","meta":{"inline_featured_image":false,"_visual_mode":"business","exclude_from_algolia":false,"author_id":0,"reading_time":"3 min read","display_reading_time":false,"homepage_thumbnail":0},"categories":[],"tags":[],"learn_topic":[],"audience":[],"post_features":[],"class_list":["post-51503","news","type-news","status-publish","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/employmenthero.com\/nz\/wp-json\/wp\/v2\/news\/51503","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/employmenthero.com\/nz\/wp-json\/wp\/v2\/news"}],"about":[{"href":"https:\/\/employmenthero.com\/nz\/wp-json\/wp\/v2\/types\/news"}],"author":[{"embeddable":true,"href":"https:\/\/employmenthero.com\/nz\/wp-json\/wp\/v2\/users\/430"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/employmenthero.com\/nz\/wp-json\/wp\/v2\/media\/51505"}],"wp:attachment":[{"href":"https:\/\/employmenthero.com\/nz\/wp-json\/wp\/v2\/media?parent=51503"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/employmenthero.com\/nz\/wp-json\/wp\/v2\/categories?post=51503"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/employmenthero.com\/nz\/wp-json\/wp\/v2\/tags?post=51503"},{"taxonomy":"learn_topic","embeddable":true,"href":"https:\/\/employmenthero.com\/nz\/wp-json\/wp\/v2\/learn_topic?post=51503"},{"taxonomy":"audience","embeddable":true,"href":"https:\/\/employmenthero.com\/nz\/wp-json\/wp\/v2\/audience?post=51503"},{"taxonomy":"post_features","embeddable":true,"href":"https:\/\/employmenthero.com\/nz\/wp-json\/wp\/v2\/post_features?post=51503"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}