Welcome to our latest HR and employment law update.

This quarter, we cover proposed changes to the Holidays Act, a suggested law change for ending employment by mutual agreement, and a Privacy Act amendment coming in May 2026.

We also highlight the 2025 Employment Monitor findings and a recent ERA case emphasising that casual contracts don’t always reflect the reality of work arrangements.

Read on for a summary of the key changes, their implications, and practical tips to keep your workplace compliant.

NZ Holidays Act Update

At the end of September, the Government announced its intention to repeal the Holidays Act 2003 and introduce new legislation in early 2026, with the aim of passing it before the next election. A two-year transition period is expected once the law is enacted.

Key proposed changes include:

Annual Leave

Annual leave would accrue, and employees would become entitled to it, from day one, at 0.0769 hours per hour worked (equivalent to four weeks per year).
Employees could cash up 25% of their annual leave balance every 12 months (an increase from the current one-week limit).

Sick Leave

Sick leave would also accrue from day one, at 0.0385 hours per hour worked.
This would reduce entitlement for part-time employees compared with the current system where both full-time and part-time employees are entitled to 10 days per year.

Leave Compensation Payments

Casual employees would receive a 12.5% leave compensation payment on all hours worked (replacing the current 8% holiday pay and delayed access to sick leave).
Part-time and full-time employees would receive leave compensation payments on additional hours worked, instead of accruing extra sick or annual leave. This would not apply where extra hours are already covered by salary.

Family Violence & Bereavement Leave

Both types of leave would accrue from day one (currently after six months).
Leave would remain based on days, with the option to take partial days.

Parental Leave

Employees returning from parental leave would become eligible for annual leave paid at their full salary rate, rather than the currently reduced rate.

Mandatory Pay Statements

Employers would need to issue itemised payslips every pay period - a new requirement unless already included contractually.

Other Changes

Other proposed changes include:

Using the same hourly rate for all types of leave.
Continuing to pay fixed allowances in full when employees are on leave.
Moving alternative holidays to an hours-based accrual system.
Introducing a clearer test for deciding whether a day is an “otherwise working day” for public holiday purposes.
Extending the required notice period for annual closedowns to 21 days.
Requiring employment agreements to include enough detail about expected hours or roster patterns.

Proposed Law Change Could Allow Employment to End by Mutual Agreement

The Education and Workforce Committee has released its findings on the Employment Relations (Termination of Employment by Agreement) Amendment Bill and has recommended that it proceeds. The bill would let employers and employees explore ending employment by mutual agreement, without those conversations giving rise to a personal grievance – as long as certain procedural steps are followed and discussions remain on a without-prejudice basis.

Key Proposed Changes

Pre-termination negotiations
A new formal step, “pre-termination negotiations,” would be introduced. Employers initiating these discussions would need to:

Inform employees of their right to representation before responding and throughout the process.
Give employees reasonable time to obtain that representation.
Provide clear information confirming the employee may decline to negotiate and that employment can only end if a written termination agreement is signed.

The Committee also recommends limiting how often employers can request such negotiations and confirms that the duty of good faith continues to apply.

If an employer fails to follow the required process, the Employment Relations Authority could cancel the agreement.

If pre-termination negotiations are found to be unfair, the Authority could order remedies including reinstatement, lost wages, and compensation.

On the other hand, employers having the option of pre-termination discussions would likely result in a shift away from lengthy formal performance and disciplinary processes.

Termination agreements
If both parties reach agreement, they would sign a termination agreement that:

Acts as a full and final settlement of all employment-related claims.
Does not require certification by a mediator.

Privacy Act Amendment

A new amendment to the Privacy Act takes effect on 1 May 2026, introducing IPP 3A. This new rule means that when organisations collect someone’s personal information or directly from someone other than the person themselves, they must take reasonable steps inform the person concerned.

There are limited exceptions, such as when the information is already public, notification would be impractical, or alerting the individual would undermine their interests or create a serious risk to safety.

Penalties may apply if organisations fail to meet the new obligations.

2025 Employment Monitor: Workers and Employers Know More About Rights and Obligations

The 2025 Employment Monitor provides insights into the experiences and perceptions of both resident and migrant workers in New Zealand, as well as employers.

Key findings

Workers’ understanding of their employment rights has improved, and both employees and employers are finding it easier to access information online.
Communications from agencies like Employment NZ (ENZ) and Immigration NZ (INZ) are reaching workers effectively, helping them navigate workplace environments and engage with government services.
Uptake of employer accreditation under the Accredited Employer Work Visa scheme remains strong, reflecting evolving migrant employment patterns.
The risk of exploitation for migrant workers has decreased, and overall satisfaction with employment conditions has risen.

Ongoing challenges

Some migrant groups, particularly workers from China, continue to report concerns about working conditions.
Around a quarter of migrant workers remain at risk of exploitation, and a similar proportion of employers may unintentionally put workers at risk.

Casual or Permanent? A Reminder for Employers

A recent Employment Relations Authority (ERA) decision serves as a warning that the label on an employment contract doesn’t always reflect the true nature of the working relationship.

Case in point: Stevenson v Mountain Chalets (2005) Limited
Ms Stevenson worked as a cleaner for Mountain Chalets under a casual agreement, yet she consistently worked 20–25 hours a week, Monday to Thursday, and the employer expected her ongoing availability. After a management reshuffle, her hours were cut and “guaranteed hours” removed. Ms Stevenson raised a grievance for unjustified dismissal.

The ERA looked at factors such as:

How regular and predictable her hours were
Mutual expectations of continued work
Employer control over her duties and availability

Decision
The ERA found that Ms Stevenson was effectively a permanent employee. While she wasn’t formally dismissed, the employer’s lack of communication and failure to pay accrued annual leave created an unjustified disadvantage. MCL was ordered to pay $8,000 in compensation and settle five years’ worth of unpaid annual leave.

Lessons for employers

Consistent, predictable work can create a permanent employment relationship, regardless of the contract’s label.
Regularly review agreements and adjust them if work patterns change.
Communicate changes clearly and promptly to avoid misunderstandings or disputes.

This case reinforces the importance of ensuring employment arrangements reflect the reality of the working relationship.

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