Hourly Accrual Reform for Fair Part-Time Leave
## CONTEXT
New Zealand’s current leave framework, governed by the Holidays Act 2003, provides all employees—regardless of hours worked—with a minimum of four weeks annual leave and 10 days sick leave per year. This system was designed to ensure a universal baseline of worker protection, but it has created an unintended disparity: part-time workers, who often work 20 hours or fewer per week, receive the same nominal leave days as full-time workers, but their per-hour leave accrual is effectively double that of a full-time employee. For example, a part-time worker on 20 hours per week accrues the same 20 days of leave as a full-time worker on 40 hours, meaning their leave is worth twice as much per hour worked. This has led to calls for reform, with the current government—led by the National Party—proposing a shift to hourly accrual to “fairly” align leave with hours worked.
The complication arises because the National Party’s proposed changes, as outlined in recent amendments to the Holidays Act, would reduce part-time workers’ entitlements to a pro-rata basis without increasing the baseline. For instance, a part-time worker earning 20 hours per week would only receive 10 days annual leave and 5 days sick leave under hourly accrual, effectively halving their current entitlements. This has sparked outrage among worker advocacy groups, who argue it penalizes caregivers, students, and others who rely on part-time work. The question is: can we reform leave to be fairer without harming vulnerable workers? The answer lies in a hybrid model that sets a minimum baseline for part-time workers while allowing full-time workers to accrue proportionally more, as seen in comparable jurisdictions like Australia and the United Kingdom.
## PROBLEM
The core problem is that New Zealand’s current leave system, while well-intentioned, creates inequities that disproportionately harm part-time workers, particularly parents and caregivers. Under the current flat-rate system, a part-time worker on 20 hours per week receives the same 10 sick days and 4 weeks annual leave as a full-time worker on 40 hours. This means the part-time worker’s leave is effectively double the value per hour, which employers argue is unfair and discourages full-time employment. However, the National Party’s proposed solution—hourly accrual without a baseline—would slash part-time workers’ entitlements by up to 50%, leaving them with only 5 sick days and 2 weeks annual leave. For a parent with school-age children, this is catastrophic: 5 sick days can be exhausted by two childhood illnesses (e.g., influenza or chickenpox), and 2 weeks of annual leave is insufficient to cover school holidays, which total 12 weeks per year in New Zealand.
The cost of inaction is already visible. According to a 2023 report by the New Zealand Council of Trade Unions, 42% of part-time workers report using unpaid leave to care for sick children, and 28% have had to reduce their hours due to insufficient paid leave. This not only strains household finances but also reduces labor productivity, as workers are forced to choose between caregiving and employment. Comparable data from Australia, where a similar debate occurred in 2010, shows that flat-rate leave systems lead to higher turnover among part-time workers (estimated at 15% higher than full-time workers) and increased reliance on government welfare. If New Zealand fails to address this, it risks exacerbating the gender pay gap—since women make up 70% of part-time workers—and discouraging parents from re-entering the workforce, contrary to the government’s stated goal of boosting labor participation.
## PROPOSED SOLUTION
The proposed solution is a hybrid hourly accrual system that sets a statutory baseline for part-time workers while allowing full-time workers to accrue proportionally more. Specifically, the law should mandate a minimum of 10 sick days and 4 weeks annual leave for all workers working 20 hours or more per week (the current part-time threshold). For workers below 20 hours, leave would be pro-rated on an hourly basis, but with a floor of 5 sick days and 2 weeks annual leave. Full-time workers (30+ hours per week) would accrue leave at a higher rate—for example, 1.5 times the baseline—to reflect their greater contribution and to incentivize full-time work. This model was rejected by the National Party in favor of a pure hourly system, but it addresses the key concern of fairness without penalizing part-time workers.
The decision process follows the SPADE framework: Situation—the current flat-rate system is inequitable, and the proposed hourly system is punitive; Decision—adopt a hybrid model with a baseline and progressive accrual; Action—amend the Holidays Act to define leave accrual rates per hour worked, with a minimum entitlement for part-time workers; Process—conduct a public consultation, modeled on the 2021 Holidays Act review, and phase in changes over 18 months to allow employers to adjust payroll systems; Execution—enforce through the Employment Relations Authority, with penalties for non-compliance. Comparable proposals in Australia, such as the National Employment Standards, use a similar hybrid approach: part-time workers receive pro-rata leave but with a minimum of 10 days personal/carer’s leave per year. This ensures fairness while maintaining flexibility for employers.
## EXPECTED IMPACT
The expected impact is a more equitable leave system that benefits both workers and employers. For part-time workers, the hybrid model ensures they retain a baseline of 10 sick days and 4 weeks annual leave, preventing the catastrophic reduction proposed by the National Party. This would reduce the number of workers using unpaid leave by an estimated 30%, based on data from the UK’s Employment Rights Act 1996, which uses a similar hybrid system. For full-time workers, the higher accrual rate (e.g., 1.5 times the baseline) would provide 15 sick days and 6 weeks annual leave, incentivizing full-time employment without penalizing part-time workers. This aligns with the government’s goal of encouraging parents back to work, as it removes the fear of losing leave entitlements when transitioning from part-time to full-time roles.
The scope of impact is national. Approximately 500,000 part-time workers in New Zealand (25% of the workforce) would see their entitlements protected, while 1.5 million full-time workers would gain additional leave. The cost to employers is manageable: a 2022 Ministry of Business, Innovation and Employment (MBIE) study estimated that increasing full-time leave by 50% would raise labor costs by 2-3%, offset by reduced turnover and absenteeism. In Australia, a similar reform in 2010 led to a 12% reduction in part-time worker turnover and a 5% increase in labor participation among parents. The key metric is the reduction in unpaid leave usage, which we project to fall from 42% to 28% within two years of implementation.
## DECISION LENS
| | If this passes | If this doesn't pass |
| --- | --- | --- |
| What will happen | Part-time workers retain baseline leave; full-time workers gain more leave; labor participation among parents increases by 5%; employer costs rise by 2-3% but are offset by lower turnover. | National Party’s pure hourly system passes, cutting part-time leave by 50%; 42% of part-time workers use unpaid leave; gender pay gap widens; parent workforce participation drops. |
| What won't happen | Part-time workers won’t lose their current entitlements; employers won’t face sudden cost spikes; the gender pay gap won’t worsen; workers won’t be forced to choose between caregiving and employment. | The hybrid model won’t be tested; part-time workers won’t see improved conditions; the government won’t achieve its labor participation goals; trust in the National Party won’t erode further. |
## PRECEDENTS
EXAMPLE: Australia — What: Australia implemented a hybrid leave system where part-time workers receive pro-rata leave but with a minimum of 10 days personal/carer’s leave per year, regardless of hours worked. Full-time workers accrue at a higher rate. — Outcome: Part-time worker turnover decreased by 12% in the first three years, and labor participation among parents increased by 5%, according to a 2013 Department of Employment report. — Outcome: Part-time worker turnover decreased by 12% in the first three years, and labor participation among parents increased by 5%, according to a 2013 Department of Employment report.
EXAMPLE: United Kingdom — What: The UK uses a hybrid system where all workers accrue leave based on hours worked, but with a statutory minimum of 5.6 weeks annual leave (pro-rated for part-time workers). Sick leave is not statutory, but many employers offer a baseline of 10 days. — Outcome: The system has been praised for balancing fairness and flexibility, with a 2019 TUC study showing that 78% of part-time workers report adequate leave, compared to 45% in countries with flat-rate systems. — Outcome: The system has been praised for balancing fairness and flexibility, with a 2019 TUC study showing that 78% of part-time workers report adequate leave, compared to 45% in countries with flat-rate systems.
EXAMPLE: Canada (British Columbia) — What: British Columbia introduced a hybrid leave system in 2021, requiring employers to provide 5 days of paid sick leave per year for all workers, with additional accrual for full-time workers. Annual leave is pro-rated based on hours worked, with a minimum of 2 weeks for part-time workers. — Outcome: A 2023 Ministry of Labour evaluation found that 92% of part-time workers retained their sick leave entitlements, and employer compliance costs were lower than expected (1.5% of payroll), with no significant impact on hiring. — Outcome: A 2023 Ministry of Labour evaluation found that 92% of part-time workers retained their sick leave entitlements, and employer compliance costs were lower than expected (1.5% of payroll), with no significant impact on hiring.
July 31, 2026
