For many employers, payroll staff and employees, the Holidays Act 2003 has long had a reputation for being one of New Zealand’s more difficult pieces of employment legislation.
Its replacement is now on the way.
The Employment Leave Act 2026 received Royal assent on 6 August 2026 and will replace the Holidays Act from 6 August 2028. The two-year lead-in is intended to give employers and payroll providers time to prepare for a significant change in the way leave is calculated, recorded and paid.
Importantly, nothing changes yet. Employers must continue to comply with the existing Holidays Act until the new legislation comes into force and cannot simply start applying the new rules early.
WHAT WILL BE DIFFERENT?
One of the biggest changes is a move towards calculating many leave entitlements in hours.
Annual leave and sick leave will generally accrue from an employee’s first day of employment, based on their standard hours. When leave is taken, an employee will use accrued leave according to the hours they would otherwise have worked.
That should also make taking part-days of leave more straightforward.
The new system distinguishes between standard hours, additional hours and casual hours. A leave compensation payment will generally apply to additional and casual hours instead of those hours generating the same leave entitlements as standard hours.
There will also be new rules for determining whether an employee would otherwise have worked on a public holiday, an area that has generated considerable complexity under the present Holidays Act.
The changes also affect sick leave, bereavement leave, family violence leave, alternative holidays and the way different forms of leave are paid.
WHAT SHOULD EMPLOYERS DO?
There is no need to change leave calculations now. The next two years should instead be used to understand what the new system will mean for payroll software, workplace policies, employment agreements and record keeping.
Employers with large workforces, collective agreements or employees working irregular or complex hours may need to begin planning earlier than others.
Employment agreements should ideally be updated by 6 August 2028. Any changes will need to be discussed and agreed with employees rather than simply imposed.
There is, however, a transitional period. Employers who have not updated their employment agreements by August 2028 will have until 6 August 2029 to do so. During that period, where an existing agreement and the new Act provide different entitlements, the employer will generally need to provide whichever entitlement is more favourable to the employee.
That could make payroll considerably more complicated, providing a good reason to have agreements reviewed before the new regime begins.
The Government will provide further guidance during the implementation period.
For employees, the immediate message is simple: Your current leave entitlements continue to apply until August 2028.
That may seem some distance away, but replacing a system that has governed holiday and leave entitlements for more than 20 years will be a substantial exercise. For employers, some early planning should make the transition considerably easier.
