Part-time workers could end up with less sick leave in an update of the Holidays Act announced by the Workplace Relations Minister.

The draft legislation will be released ahead of targeted consultation in September.

Van Velden says she has heard from businesses who are struggling to adjust to the previous government's decision to double sick leave entitlements from five to 10 days, which took effect in 2021.

She says changes in the draft bill could include pro-rating sick leave "to better reflect how much an employee works".

"Workplaces that rely on part-time workers are particularly vulnerable to unexpected staffing shortages."

This would mean the amount of sick leave workers are entitled to will depend on how much they work - leaving part-time workers with less.

Van Velden says shifting to an accrual system for annual leave entitlements is "just common sense".

"While workers might not notice any change in their entitlements, from a payroll perspective this should make a huge difference. An accrual system should help avoid the complex calculations that regularly stump payroll software and should therefore reduce compliance costs for employers."

Consultation will be targeted to stakeholder groups, who are encouraged to register their interest with the Ministry of Business, Innovation and Employment.

Van Velden says MBIE will select a "representative sample of organisations and individuals to consult with" based on their expertise in implementing payroll and business systems, or understanding of the effects of the Act on employers or employees.

"I believe it is important to hear from small businesses in particular, given small businesses will adopt a range of working arrangements and often do not have the same payroll infrastructure as larger organisations.

"Change has been a long time coming, and I know there are many who are frustrated with the Holidays Act. We need an Act that businesses can implement, and that makes it easy for workers to understand their entitlements. We need to do this once and do it right."

The Holidays Act has been beset by problems since it came into force in 2004, with hundreds of thousands of people receiving too little holiday pay due to miscalculations under the complicated law in recent years.

The problems mostly come from the requirement that workers be entitled to holiday pay amounting to the higher of two options: their ordinary weekly pay or an average over 12 months.

Labour set up a taskforce to tackle the payroll problems in 2018, but failed to introduce legislation on it before being relegated to opposition in last year's election.

Van Velden in March promised to find solutions to the problem, identifying it as one of her top priorities - starting with considering the changes Labour had proposed.

-RNZ.