Part-Time Sick Leave: What Employers Need to Know

A significant shift in employment law

Workplace Relations Minister Brooke van Velden has described this as a “fairer and more proportionate” approach, stating: “If you work one day a week, you might need five days off, but you’re only working one day anyway, so you only need that one day from your employer”. While this reform is framed as a simplification, it presents both pros and cons for employers and employees alike.

Who is affected?

Part-time workers
Those employed for limited hours will see their sick leave entitlements reduced under the new framework. While the government argues this removes a disproportionate liability on businesses, unions such as the New Zealand Council of Trade Unions have warned that the impacts may fall hardest on vulnerable groups who are overrepresented in part-time work.

Employers
For many businesses, especially small to medium enterprises, the change is likely to reduce the leave liability on their balance sheets. This may make part-time positions more viable to offer, particularly in sectors where staffing flexibility is essential. However, employers will also need to carefully adjust payroll systems, contracts, and internal policies to comply with the new rules.

Injured workers on ACC
Another controversial shift is that employees receiving weekly ACC payments will no longer accrue leave during that period. While this eases costs for employers, it raises concerns about equity for employees unable to work due to injury.

Other workers
There are some gains for employees in other categories. Casual workers will see their “pay-as-you-go” leave loading increase from 8% to 12.5%, and parents on parental leave will continue to accrue annual leave at the full rate, ensuring fairer outcomes upon their return to work.

Balancing fairness with compliance

The government’s central justification is clarity. For years, the complexity of the Holidays Act has led to widespread errors and billions of dollars in remediation, including within the public sector. By moving to an hours-based accrual system, the hope is to avoid repeating those costly mistakes.

The Employers and Manufacturers Association has welcomed the change, calling it a “long-overdue fix” that brings fairness and simplicity to leave entitlements. Still, employers should not underestimate the transitional challenges—rewriting payroll systems, updating employment agreements, and managing existing leave balances will take careful planning.

What this means for businesses

From a legal standpoint, these reforms highlight the need for employers to review employment contracts and ensure compliance with the new framework once enacted. Particular care should be taken in:

• Adjusting payroll software and records to reflect hours-based accrual.
• Communicating clearly with staff about their entitlements under the new law.
• Managing risks of potential disputes, particularly with employees whose entitlements may reduce.
• Reviewing health and safety obligations, as reduced sick leave may inadvertently place pressure on unwell employees to attend work.

Navigating the changes

While the reforms are aimed at simplicity, their practical application may be anything but straightforward in the short term. Employers will need to balance reduced costs with maintaining positive workplace culture and avoiding potential reputational risks associated with cutting entitlements. Wynyard Wood assists employers in navigating the complexities of employment law, including matters relating to part-time sick leave, payroll compliance, and staff entitlements. If your business requires support to adapt to these changes, our experienced team is here to help.