Holidays Act reform – What employers need to know about the new Employment Leave Act 2026

On 6 August 2026 the Employment Leave Act, New Zealand’s long awaited replacement for the Holidays Act 2023, received Royal Assent and became law.   

Although the Employment Leave Act (the Act) has been enacted, most provisions will not come into force until 2028. The delay is to enable employers time to prepare for the significant change to payroll, systems and employment agreements that will be required by the new law.  

The intention of the law change is to simplify the way in which leave is calculated, ultimately creating clarity, improved compliance and a framework more fit for modern working arrangements. 

This article addresses how the law will change.[1] For key steps employers should start taking in anticipation of the law change, DTI Lawyers Director Jaime Lomas is providing a Masterclass in association with the Waikato Chamber of Commerce this month [2].  

Opposition to the new law - What if the Government changes at the November General Election?   

While in agreement that there needs to be improvement to the current law, there was not cross-party agreement on how this should be achieved. 

The Labour Party did not support the Bill. This was based on its view that it leaves thousands of workers worse off by tying leave accrual to standard hours only; entrenches unequal leave outcomes for workers in non-standard arrangements; and treats leave as a cost to be managed, rather than a health and wellbeing entitlement. (Appropriately, the Bill was amended following submissions to the Select Committee retaining reference to annual leave being for “rest and recreation”, as opposed to an opportunity to take paid time from work).   

The Green Party also opposed the Bill, on the basis that it will disproportionately affect part-time workers, those with variable or casual workers, women, young people, Māori, Pasifika and migrant workers.   

To date, the Labour Party and the Greens have not announced any policy on changes that could be made if they were elected to Government, i.e. whether those could tweak aspects of the Act as passed, or, try to revert to the existing Holidays Act. Given the collective concerns over many decades about the complexity of the Holidays Act and non-compliance that has followed, the underlying the simplicity created by the Employment Leave Act may be a useful starting point. 

Key changes 

Three new categories of working hours

The Act introduces a distinction between different types of working hours: 

• standard hours: are hours an employee is required to work under their employment agreement, and for which the employer must pay the employee; 
• additional hours: are hours an employee works above their standard hours (including hours an employee may be required to work under an availability provision), where the employer must make an additional payment for those hours; and 
• casual hours: are the hours worked by an employee where the employer is not required to offer work and the employee is not required to accept the work offered. 

The distinction between different types of working hours underlies how leave will accrue and whether a leave compensation payment applies. 

Where an employee’s standard hours are not sufficiently specified in their employment agreement or work roster, employers and employees may need to agree a notional roster to determine how leave accrues and is taken.

Leave calculated in hours 

Annual and sick leave will no longer be determined by weeks or days, but based on an employee’s “standard hours”.  

Annual leave will accrue at a minimum rate of 0.0769 hours for each standard hour.  

Sick leave will accrue at 0.0385 hours for each standard hour, up to a maximum balance of 160 hours.  

Leave will also be taken in hours. Employees will use one hour of accrued leave for each hour they take off work. 

Leave available from the first day of employment 

Annual leave and sick leave will accrue from an employee’s first day of employment. 

Bereavement leave and family violence leave will also be available from the start of employment, including for casual employees. 

Leave payments and leave taken in single hours

Leave will be paid using a single hourly leave pay rate across all leave types. This is based on the employee’s lowest hourly rate for the day the leave is taken.  

Fixed allowances will continue to be paid in full during leave. 

Annual leave taken after parental leave will be paid in the same way as other annual leave. This is a change from the current law where the annual leave entitlement is based on an employee’s average weekly earnings over the preceding 12 months, meaning employees returning from parental leave can receive reduced annual leave payments. 

Leave compensation payments for additional or casual hours

Annual and sick leave will not accrue on additional or casual hours. Instead, employees will receive a 12.5% leave compensation payment for those hours. 

Cashing up annual leave

Compared to the current Holidays Act where employees are able to cash up one week per year of their total annual leave balance, employees may request to cash up 25% of their annual leave balance.  

Prescribed requirements for pay statements and record keeping

Each pay period, employers will be required to provide itemised pay statements. Employers will also be required keep more detailed records of employees’ hours, leave entitlements and payments. Pay statements for each pay period must include: 

• the amount paid to the employee, itemised by category for example, ordinary rate, leave compensation payment, or overtime rate); 
• any deductions that the employer is required or entitled to make for income tax or any other authorised purpose; 
• the amount of any employer contributions required under other legislation; and 
• leave information for the relevant pay period, where applicable. 

Public holidays and alternative holidays

For employees who work additional days or do not have a specified pattern of work, a new “otherwise working day” test will apply. This provides that a public holiday will be an otherwise working day if the employee worked, or was on leave, on at least half of the corresponding weekdays during the previous 13 weeks. 

Where an employee works on a public holiday that is otherwise a working day for them, alternative holidays will also accrue in hours. 

Compliance during the transition between the current and new laws 

There is a 24 month period for the Act to come into force, with employers then having a further year to update terms relating to leave in employment agreements.   

Employers must continue to comply with the Holidays Act in the meantime.  

Employer assistance

The changes are significant, and employers are wise to start preparing for the new Act.  For advice, guidance and/or training from our specialist employment law team, please contact [email protected] or 07 282 0174