The Government has directed officials to change the proposed direction of reform to the Holidays Act, based on feedback that the draft Bill isn’t going to solve issues with the current situation.

"The Government recently conducted targeted consultation on an exposure draft Bill which built on work that had started under the previous government. The feedback I have seen indicates that the draft Bill is not going to solve the issues of the Act," Workplace Relations and Safety Minister Brooke van Velden said.

"Not only have I heard from submitters that further simplification is possible but there were some who believed that what we put out for consultation was more complex and had higher compliance costs than the legislation we have now.

"I want to get this right, and I have always said that this consultation would be genuine. It has become clear that a fundamental change is required to give employers and employees the simplicity and certainty they have been calling for.”

She said she had asked her officials to "go back to the drawing board".

"I believe it is necessary to change the direction of the Holidays Act reform so that simplicity is prioritised in order to improve workability and reduce compliance costs."

The minister had also asked officials to begin working on an hours-based accrual model for annual leave, saying she had "got the message" it was preferred across a range of sectors and working arrangements.

"Hours-based accrual has potential to make a significant improvement for simplicity, and I know a lot of businesses use, or would prefer to use, hours-based calculations.

"However, at the moment, businesses are having to adopt complex workarounds and frequently have to check their payroll systems to ensure they are compliant with minimum requirements or risk the costs of non-compliance."

Business NZ has welcomed the accrual change and said it would work with officials to ensure the needs of business owners and workers were met.

"The move to hours-based accrual reflects the fact that the way we work has changed massively since the 1940s, when the current weeks-based approach was introduced," chief executive Katherine Rich said.

"Variable patterns of work are the norm in today’s working world, and hours is the basis on which most leave is now administered."

Van Velden had previously said workers suffered under current legislation because uncertainty around entitlements led to underpayment; businesses suffered due to the complexity of compliance; and the taxpayer suffered because even government ministries have run afoul of the Act.

Te Whatu Ora was involved in a years-long project to pay back an estimated $2.235 billion, with 270,000 past and present employees impacted.

Van Velden said she still wanted to pass a new Act by the end of the parliamentary term. She would be seeking Cabinet decisions next year.

Acting CTU President Rachel Mackintosh said six years of work by businesses, unions and government had been wasted.

"The minister has cynically kicked the can on Holiday Act reform even further down the road — meaning an even longer delay for workers trying to get their basic rights to leave recognised," said Mackintosh.

"The Government is again making decisions that are bad for workers by departing from an agreement that ensured any changes wouldn't be damaging to working people.

"When this review commenced, businesses and unions agreed that Holidays Act reforms would not result in leaving workers worse off. The change in direction announced today throws that agreement up in the air.

"Workers and businesses have asked for clarity around their Holidays Act requirements. Rather than getting on with the job, all the minister has done today is ensure greater uncertainty for even longer.

"Her proposed new model could also mean that every worker would need to record their hours worked, which would add complexity to the system. The minister needs to listen to workers and business as social partners and implement what was already agreed."

Labour’s workplace relations spokesperson Camilla Belich called the move an "ideological attack on workers’ rights".

"With the Holidays Act being one of the biggest concerns for business, scrapping work on the legislation leaves both workers and business with no certainty over the future.

"This work was a collaboration with businesses and employees to get the settings right. The Government is once again taking us backwards because it’s more interested in protecting the rights of big business rather than working people."

Van Velden also said she was aiming to make an announcement on the minimum wage rate for 2025 before Christmas "in order to provide businesses with certainty".

The Minister for Workplace Relations and Safety was required by law to review the minimum wages annually, to take effect on April 1 each year.

Other changes have been made recently for workers and employers.

On Monday, van Velden announced plans to reintroduce pay deductions for partial strikes, while late last month she said, as part of the ACT-National coalition agreement, legislation that would prevent NZ’s highest earners from being able to make unjustified dismissal claims would be introduced next year.

Changes to the personal grievance process have also been announced, including that employees whose behaviour amounted to serious misconduct woildn’t be able to claim money from their former employer.