Workers who rely on overtime, commission or extra shifts to top up their income are being warned they could lose hundreds of dollars in the weeks they take annual leave, once New Zealand’s new leave law takes effect.
The Employment Leave Act received Royal assent on 6 August and will replace the Holidays Act 2003 from 6 August 2028. It rebuilds how leave is calculated from the ground up. Annual and sick leave will accrue in hours rather than weeks, starting from an employee’s first day, and every hour of leave taken will be paid at a single hourly rate rather than the higher of two comparison rates used under the current law.
That single rate is where the change bites. Employment law expert Alison Maelzer of Hesketh Henry said people who work a lot of overtime or whose pay includes regular commission could find their annual leave paid at a much lower rate than they are used to, because payments will default to an employee’s ordinary rate of pay unless both parties agree otherwise.
Workers First Union national organiser Callum Francis said the practical effect would land hardest on people whose contracted hours sit well below the hours they actually work. “People are going to take annual leave and suddenly realise that they’re losing potentially hundreds of dollars in a week,” he said.
Francis said supermarket and retail workers were commonly kept on minimum hour contracts while regularly picking up extra shifts to make ends meet, and warned some would choose to cash up leave rather than take it once the change lands.
Not every part of the overhaul has drawn criticism. The Act also introduces sick leave from an employee’s first day, up from the current six-month wait, and allows parents returning from paid parental leave to accrue further leave at their normal rate rather than a reduced one.
Employers have two years to rebuild payroll systems for the new hourly accrual model, with a further year after that to bring employment agreements into line before the 2028 switchover. Payroll remediation under the current Act has already cost businesses hundreds of millions of dollars nationally, a bill unions and employers alike are keen not to repeat.
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