Part-time workers will no longer have a minimum sick leave entitlement as part of the Government’s reform of the “broken” Holidays Act.

Under the new scheme, detailed in a Cabinet paper obtained by the Herald, part-time employees will have their sick leave calculated by the number of hours they worked with no minimum entitlement.

Full-time workers with “standard five-day working patterns” would continue to receive up to 10 days of sick leave.

An approach based on hours worked is fundamental to Workplace Relations Minister Brooke van Velden’s proposed changes to the Holidays Act 2003, which include a new hours-based annual and sick leave accrual system for all contracted work hours.

She also seeks to introduce a “leave compensation payment” of 12.5% for overtime or additional hours worked, as opposed to an employee accruing leave.

Some of van Velden’s changes were signalled in June by Prime Minister Christopher Luxon, who supported “pro-rating sick leave” to address how some part-time employees were receiving “full-time 10-day equivalency”.

Van Velden is expected to speak to media about the announcement about 3.15pm. A livestream can be found at the top of this article.

The Cabinet paper, considered in August, detailed van Velden’s view the previous Labour Government’s attempts to fix the act had “missed the mark” and the legislation was “broken”.

“Despite good intentions, virtually all employers have, at times, got aspects of its calculations wrong,” she said.

“The nub of the problem is that employees’ entitlements to holiday pay are denoted in weeks, but hours vary for many employees. Parties then have to figure out how to define a working week for each employee, which can be challenging for employees who work variable hours.

“This basic problem has led to enormous complexity, confusion, and widespread non-compliance, as people have tried to muddle through each circumstance as best they could.”

Green MP Teanau Tuiono has strongly condemned the proposal in the past. Photo / NZME

Van Velden’s solution was to shift to hours-based accrual, claiming leave balances would then better reflect actual hours worked without “any scaling for increases or decreases in standard hours”.

“Compared with the status quo, employees who increase their standard hours might notice their leave doesn’t go as far,” she said.

“Equally, employees who decrease their standard hours won’t see any reduction as they would have in the past.

“Employers will no longer need to monitor and re-calculate annual leave balances whenever employees agree to different working patterns.”

Sick leave would also be calculated in a similar fashion. While it wouldn’t impact the 10-day maximum allowance for full-time workers, part-time workers would have no minimum entitlement.

“This will ensure employees receive a sick leave entitlement that is proportionate to the amount they work,” van Velden’s paper said.

This move attracted strong criticism when raised in June, Green Party Workplace Relations spokesperson Teanau Tuiono saying at the time it would be “nothing short of an attack on the morale and productivity of our workforce”.

Van Velden has also sought to simplify compensation for additional hours worked, opting not to allow workers to gain more leave but to require employers to make a “leave compensation payment” of 12.5%.

According to the paper, van Velden was concerned in allowing greater accrual, employers would face “larger leave liabilities” and instead preferred an immediate payment.

She acknowledged it could increase costs for employers if employees didn’t use their full sick leave entitlement, but argued it would be partly offset by a decrease in paid leave.

Casual workers would also receive the payment as opposed to accruing annual or sick leave, under the proposal.

Adam Pearse is the Deputy Political Editor and part of the NZ Herald’s Press Gallery team based at Parliament in Wellington. He has worked for NZME since 2018, reporting for the Northern Advocate in Whangārei and the Herald in Auckland.