The Government is defending proposed changes to the Holidays Act.

Unions are critical of recommendations from the working group set up to review the legislation, especially reductions to leave entitlements.

Businesses on the other hand are happy about the chance to be able to swap a worker's fourth week of leave for cash, if both parties agree.

Acting Prime Minister Bill English says the Government promised during the election campaign it would make the changes, with the legislation expected to be introduced to Parliament next year.

"And actually we're getting a pretty good response from people who think the act passed in 2003 was pretty complex for everybody... but inflexible for employees."

Mr English says the changes make calculating holiday pay rates more transparent.

Business New Zealand is also praising the move saying for years employees and bosses have been discussing the option but legislation has prevented it.

Chief Executive Phil O'Reilly says workplaces will need to get together and decide on a standard policy for all. He says however that it could lead to all sorts of industrial difficulties and tensions in a work place if an employer is prepared to offer flexibility to one employee, but not another, for whatever reason.

Mr O'Reilly says for some employers, paying out a worker will be more expensive and inconvenient. He says so long as both the worker and employer agree, the swap should be allowed.

Meanwhile Labour is vowing to fight the changes which it says will reduce workers' entitlements. Labour MP Darien Fenton says the changes are a deceitful grab back of workers' holiday rights.