Addressing Holidays Act non-compliance

Review of the Holidays Act

The Holidays Act is currently being reviewed. To find out more visit the MBIE website.

Holidays Act Review – MBIE (external link)

Background to changes

Issues of non-compliance with the current Holidays Act 2003 have been widely reported in the media and are well known to employers, employees, and professional advisors.    

While the Act provides some detail about entitlements and pay for holidays and leave, there remains scope for uncertainty, especially where there is variation in employees’ working arrangements or payment rates. In addition to this, application of the Holidays Act has often been inconsistent or incomplete.

These issues have contributed to a high level of non-compliance with the Holidays Act, and many organisations in recent years have invested significant resources updating their payroll systems and correcting historical underpayments. 

Investigation and enforcement

From November 2015 to 30 June 2020 the Labour Inspectorate had a specialist team investigating and enforcing systemic Holidays Act issues. The work of that team, and the wider Inspectorate, resulted in more than $237 million in remediation payments being paid to 227,300 employees across numerous organisations during that period.

The Inspectorate continues to investigate and enforce breaches of the Act, but no longer has funding for a specialist team.

Employers’ obligations

Until new legislation comes into force, existing rules apply. This means that employers must comply with the current Holidays Act, and ensure they are providing the correct entitlements and payments to employees. They are also obliged to pay employees for any historical underpayments that have occurred.

The Labour Inspectorate urges any employers who have not yet done so to review their compliance with the Act and to pay any arrears. They should also let their employees and representatives know that this work is being done. Transparent communication ensures that an employer’s good faith obligations are being met.  

Good faith