Kia ora,
I’m Mike Pullar, Data & Remediation Manager at Premium Payroll Solutions. I have worked in Holidays Act compliance since around 2016, covering payroll remediation, data analysis and the practical interpretation of legislation. Over that time, our work has extended well beyond leave calculations to include wage underpayments, fraud and a wide range of complex payroll issues.
One of the hot topics in the payroll world right now is the new Employment Leave Act, which was passed in August. This legislation is due to come into force on 6 August 2028 and differs quite significantly from the Holidays Act that it replaces.
In late August, Sue Hancock and I spoke with Paul Mackay from BusinessNZ about the transition to the new Act. From what we've heard, it does sound like MBIE appear to be developing an initial implementation framework, but it is still difficult for businesses to get clear information on how the legislation is intended to be interpreted. MBIE has released some Technical FAQ documents which do provide some useful detail, but these are focus more on intended or preconceived "usual" scenarios. We know from experience that many businesses operate in a far more flexible and variable manner. Many practical questions will only become clear once organisations begin deeply examining how the new legislation interacts with their own staff, particularly in relation to employment agreements, but also payroll configurations and workforce arrangements.
Some clients are already asking how they should manage the transition. My advice is to start planning sooner rather than later. While the calculations may in principle be simpler under the new legislation, this pushes more complexity into the employment agreement and rostering side of the picture. The ability to define "what is a week" is now more crucial than ever, and will require pre-existing and ongoing agreement with your employees. Crucially, this must be set out before the legislation comes into force. Payroll no longer have the ability to just "make things work" on pay day as it could under the Holidays Act. While you should be able to rely on your payroll vendor to get the new calculations right, you're still going to need to check with them about what additional and up-to-date data they are going to need going forward. Things like advance notice of each employee's agreed work pattern (standard and additional hours) and day by day timesheet data are now essentially minimum requirements.
Then there are the transition issues that we can already predict, particularly for businesses who already outlay their leave entitlements in their individual or collective employment agreements. If you have agreed to certain leave entitlements specifically, rather than simply by reference to the legislation in force on the day, then you have likely agreed to more than the new legislation will provide. The Employment Leave Act typically results in leave entitlements that are roughly equal, but in many cases lower than, those under the current Holidays Act. Without incentives to move away from these more generous agreements, we could see Holidays Act-like entitlements remain sticky for a few years following the legislation switchover. Phasing out these legacy clauses, or at least being prepared to potentially support dual methods of calculation, will be critical. Likewise, employers with many employees on very high leave balances should ask: will these employees be incentivised to take their outstanding leave before the calculations change? What can you do to minimise these risks?
It goes without saying that waiting until the end of the two-year implementation period, or assuming that your software provider will take care of everything, is going to create unnecessary risk. The transition is not simply a software update. Your staff, chiefly Payroll, HR and management, all need to be brought up to speed with what's required of them. Many of the more difficult issues are likely to sit within employment agreement and collective agreement negotiations, which are now more heavily shaped than ever by leave legislation. You should also expect changes to payroll rules and day-to-day operational practices - particularly for employers whose work patterns are genuinely or unavoidably variable in nature.
At a minimum, we recommend that every organisation should complete an internal readiness review before end of next year. PPS has already begun cost modelling and transition planning with several clients, helping them understand the likely scope and financial impact before major decisions are made. If you need support assessing the impact on your organisation, we can work through it with you.
The wider challenge, however, is capability. There are significant knowledge gaps across the payroll profession, software providers, and the HR and finance teams responsible for payroll governance. Payroll requires an unusual combination of employment law, mathematics, systems knowledge, financial understanding, logic and critical thinking. It is difficult to find individual people who have developed capability in all of these areas.
Even then, currently only the raw text of the Employment Leave Act exists to guide us, and I wouldn't disparage anyone who finds it difficult to read, let alone interpret. At PPS we have put significant effort into understanding the legislation properly and how it could apply to a vast range of non-typical scenarios. We are skilled at explaining these concepts in plain English with coherent logic applied, as well as at discovering the various loopholes or oversights that are present.
To help organisations strengthen their internal knowledge, PPS now provides tailored in-house training. This may be a focused session lasting a few hours, or can be a more detailed programme delivered over one or two days. Rather than giving a generic explanation of the new Act, we can use your organisation’s actual situation to make the training directly relevant to your team. We can also use these sessions to explore existing system issues and answer the practical questions your people are dealing with.
If you need to strengthen your payroll capability more permanently, PPS can also help assess and recruit experienced payroll professionals. Alternatively, our specialists can work within your organisation and provide the capability you need without requiring you to add permanent headcount.
As always, thank you for your continued trust in Premium Payroll Solutions. We look forward to helping you navigate the changes ahead with clarity, confidence and practical advice.
Mike Pullar
Director | Data & Remediation Manager
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