If sick leave is exhausted, employees may be able to use annual leave, unpaid leave, or other workplace arrangements or any additional benefits available.
When an employee becomes seriously ill or injured, most employers know what to do in the first few days. Sick leave is approved, shifts are covered, and managers check in.
But when absence stretches into weeks or months, things become less clear.
Many New Zealand employers are unsure where their legal obligations end and where their responsibilities as an employer continue. At the same time, extended absence can affect productivity, staffing, and business costs.
Understanding what the law requires – and where protection gaps exist – can help employers plan how to support their employees and manage operational risk.
What you should know
Employment law in New Zealand sets out minimum rights and responsibilities for employers and employees.
According to Employment New Zealand, “as an employer, you must provide work to your employees and give them their minimum employment rights.”
These rights apply even if they are not written into an employment agreement.
In practice, this means employers must understand key areas such as sick leave, workplace health and safety obligations. Employers should also understand what support systems exist when employees cannot work for extended periods.
Sick leave and minimum legal entitlements
Employees in New Zealand are entitled to statutory leave protections.
This entitlement often covers short illnesses. However, serious conditions or recovery from surgery can require a much longer time away from work.
When sick leave runs out, employees may have limited income support unless other protections are available.
Understanding the role of ACC
New Zealand’s Accident Compensation Corporation (ACC) system provides financial support for employees who are injured in accidents.
ACC may help with medical treatment costs and provide partial income replacement during recovery.
However, ACC generally applies only to accidental injury.
Serious illnesses such as cancer, heart disease, or many mental health conditions usually fall outside the ACC system.
The protection gap many businesses face
This difference between injury and illness creates a gap in financial protection.
For example:
- If an employee is injured in an accident and cannot work, ACC may provide income support.
- If an employee becomes seriously ill and cannot work for several months, ACC typically does not apply.
Without other financial protections in place, employees may have no income replacement during recovery. At the same time, the business still needs to manage the operational impact of the absence.
What could an extended absence cost your business?
The impact of long-term employee absence can be significant, particularly for small businesses.
Common challenges include:
- Operational disruption: Work still needs to be completed. In smaller teams, this often means other employees take on additional responsibilities.
- Recruitment and replacement costs: If an employee cannot return, the business may need to recruit, hire, and train a replacement.
- Workplace morale: How a business responds when a team member is facing illness often influences workplace culture.
How some NZ employers address the protection gap
Many employers choose to strengthen their employee support systems through workplace benefits programs.
These programs can help employees manage financial stress during illness or injury while also helping businesses reduce workforce disruption.
How employee benefits programs can support your workforce
Employee benefits are increasingly used by businesses to support both workforce wellbeing and long-term business resilience.
Marsh employee benefits, solutions such as the Select by Mercer Marsh Benefits program provide workplace insurance, health and well-being benefits designed specifically for small to medium-sized businesses.
These programs are designed to help businesses look after key employees while also supporting broader organisational goals such as workforce stability and productivity.
Mercer Marsh Benefits’ employee benefits programs can help businesses:
- Attract and retain employees through additional workplace benefits
- Improve productivity through healthier and supported workforces
- Provide flexible benefits that suit different business needs
For growing organisations, these benefits can become an important part of a broader people-risk strategy.
Why employee benefits matter for growing businesses
Employee benefits are not only about supporting individuals. They can also help businesses manage workforce risk.
Marsh highlights that providing workplace benefits is a way to “look after key and loyal staff with health, workplace wellbeing and employee insurance benefits.”
For SMEs, these programs can help strengthen employee loyalty while supporting recruitment and retention as the business grows.
Not ready to talk to someone yet?
Try the Employee Benefits Evaluator, a free, 10-minute tool that benchmarks your current employee benefits against the NZ market and identifies where income protection, group life, and wellbeing support could strengthen your offering.
Frequently asked questions
ACC generally covers injuries caused by accidents. Most illnesses, including serious medical conditions, are not covered under the ACC system.
No. Income protection insurance is optional, but many employers provide it as part of workplace benefits.
Extended absence can lead to productivity loss, recruitment costs, operational disruption, and potential workplace disputes.
An EAP offers confidential support services such as counselling, financial advice, legal guidance for employees and extends to family members.
Employee benefits can support workforce wellbeing while helping businesses attract and retain employees.
Yes. Many employee benefits programs are designed specifically for SMEs and can be introduced gradually.
Businesses can benchmark their benefits against the market, review employee needs, and explore solutions that support both employees and business goals.
References
- Employment New Zealand, “Employee rights and responsibilities, https://www.employment.govt.nz/starting-employment/rights-and-responsibilities/employer-rights-and-responsibilities, accessed 22 July 2026
- Employment New Zealand, “Leave and holidays, https://www.employment.govt.nz/leave-and-holidays, accessed 22 July 2026
- Worksafe New Zealand, “General requirements for workplaces”, https://www.worksafe.govt.nz/managing-health-and-safety/businesses/general-requirements-for-workplaces, accessed 22 July 2026
Marsh Limited (NZBN 9429040918792)(“Marsh”) arranges the insurance and is not the insurer. This page contains general information and does not take into account your individual objectives, financial situation or needs. For full details of the terms, conditions and limitations of the covers, refer to the specific policy wordings and/or Product Disclosure Statements available from Marsh on request. This publication is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy. Marsh shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Marsh makes no representation or warranty concerning the application of policy wordings or the financial condition or solvency of insurers or re-insurers. Marsh makes no assurances regarding the availability, cost, or terms of insurance coverage.
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