Five practical steps to navigate the NZ Holidays Act

Few regulations create as many headaches for organisations in New Zealand as the Holidays Act 2003. While designed with good intentions, its application has proven challenging, leaving many businesses vulnerable to non-compliance and costly remediation. This guide explores the Act's complexities and offers practical steps organisations can take to navigate its requirements successfully.

Understanding the NZ Holidays Act

The Holidays Act 2003 applies to all employees working in New Zealand, aiming to promote balance between work and other aspects of employees' lives. It provides a framework for employees’ minimum leave entitlements, and its complexity has made it difficult for many organisations to meet its requirements.

Adding to the complexity is the dramatic change in the workforce since 2003, as well as the increasingly unreliable data held by many organisations. Together, this increases the risk of non-compliance, even when organisations have the best intentions.

While the government has acknowledged these issues and is working to resolve them, change takes time. In fact, in December 2024, the proposed Holidays Act reform was sent for review after community consultation raised concerns that the draft legislation was too complex and unworkable. Until meaningful changes are made, organisations must find effective ways to navigate the Act's requirements.

Why is the Holidays Act so challenging?

The Holidays Act's complexity stems largely from how dramatically the workforce has changed since its creation in 2003. Today's workforce features more flexible working arrangements, variable hours, and changing patterns that the Act wasn't designed to accommodate easily.

Stuart Tabuteau, Chief Financial Officer at CHT Care Homes, notes that the biggest challenge for many organisations is managing compliance with the existing Act, while waiting for the promised reforms. "When you have a variable workforce, what does a week mean for them when you're allocating leave? What happens when people change their contracts or take leave in advance? These are just some examples of what makes compliance difficult," he explains.

Recent high-profile cases of non-compliance have put the spotlight on the issue. This prompted the team at CHT to engage consultants to undertake a comprehensive review and identify areas for improvement. This review revealed that while some aspects could be solved with their existing solution, more significant issues require a fundamental system change.

The uncertainty surrounding potential amendments to the Act adds another layer of complexity. With proposed changes dependent on parliamentary processes and subject to delays, organisations must find ways to comply with current requirements while maintaining the flexibility to adapt to future changes.

Steps to support compliance with the NZ Holidays Act

Partner with local experts

Ben Kropman, Senior Manager for Solutions Advisory at Dayforce, emphasises that organisations first need to understand their knowledge gaps. "If you have a workforce where people are being paid hourly or don't have regular patterns of work, then complying with the Act becomes really difficult. And if you have multiples of these groups in your business, you need to understand their different requirements and have robust strategies in place so you can accurately calculate leave."

As a starting point, Kropman recommends that organisations engage an advisory team with specialist expertise in the Act. "Rightly or wrongly, people have an assumption that the resolution to their problem is in the software, but that's never the case. Software is an important tool in the compliance journey that fits with processes and the people overseeing it, but it's never a replacement."

Tabuteau reinforces this advice. "You really can't rely on your existing vendors' assurances that they're compliant,” he says. “The Act is very complicated, so you need to have independent testing that gets under the hood of your systems and operations and uncovers what you might be doing wrong."

Develop a robust data strategy

Having a clear strategy for data management is crucial for effectively managing compliance. "This means having a clear understanding of where your inputs are and where the calculations are happening that need to support us. Then understanding the gaps, which feeds into the capability you need," Kropman explains.

Kropman shares key questions organisations should ask themselves: "Do we have any gaps? Are we filling any gaps manually? How time-consuming is that, and how risky is that?” he said. A thorough assessment will highlight areas where data collection or management needs improvement.

Evaluate opportunities with technology

After establishing a data strategy, organisations can then take a more strategic look at their technology solutions. Consider the opportunities you have to improve your processes with technology and how you can implement them in a scalable manner.

"The critical thing you want when managing something as complex as the Holidays Act is consistency. You want to avoid any opportunities for outcomes to be altered because of an inconsistent process," says Kropman.

Technology solutions should help provide the tools to maintain consistent processes across the organisation, reducing the risk of manual errors and variations in how leave is calculated and allocated.

Train your people

It’s important to remember that managing compliance doesn't rest solely with the payroll team. "I think there is a misconception that compliance falls to payroll to get it right," says Kropman. "It actually falls on everyone to get on board and understand what they need to do. For example, entering the right data in a leave request, which can have a knock-on effect when done incorrectly and at scale."

"If a business isn't compliant, that may end up in a situation where they have to pay significant amounts of money for remediation, which might make them non-viable as a company," Kropman warns. "I think this is a point that's missed a lot, and why it's important that everyone knows what they need to do to meet their compliance obligations. It doesn't have to be onerous. It just requires educating employees about what they need to do and making it easy for them to follow those requirements."

Unify your data

Unifying data required for assessment in relation to the Act can help reduce silos of data and calculation errors, as one platform has access to all the information needed to make a decision.

"Unification means having one platform to manage your employees. That means managing when they work - from planning their work, recording when they actually work, calculating pay based on actual hours worked and processing that pay," Kropman explains. "When you ask employees to engage with one platform, you increase the likelihood of adoption. So, by offering a simplified experience and increasing adoption, you also increase the likelihood of being compliant."

Kropman also highlights the importance of calculation flexibility. "You want your system to have the option to tailor outcomes based on any risk mitigation advice you've received, so you're not locked into one approach that's been programmed into the system.” Ongoing flexibility allows you to create new pay codes and rules without requiring a new request from your vendor or customisation, helping reduce the cost of managing compliance.

Take control of your Holidays Act compliance journey

Navigating the complexities of the NZ Holidays Act requires a strategic approach that combines expert advice, robust data management, appropriate technology, effective training, and unified HCM systems. By implementing these measures, organisations can reduce their compliance risk while creating more efficient processes.

When looking for a software partner, prioritise solutions that offer flexibility and agility to adapt to the changing compliance landscape. The right partner will not only help you address current requirements but also position you to respond effectively to future changes in the regulatory environment.