Employment Leave Act 2026: Preparing for Change

New Zealand’s employment leave framework is set for a significant overhaul following the enactment of the Employment Leave Act 2026, which will replace the Holidays Act 2003. The reforms aim to simplify leave entitlements and calculations, providing greater clarity for employers and employees.

The Act is scheduled to come into force on 6 August 2028, giving employers a two-year transition period to prepare for the changes. Until then, the Holidays Act 2003 remains in force.

Key changes for employers

Annual and sick leave accrual

The new framework introduces an hours-based approach to leave accrual. Annual leave will accrue from the first day of employment, providing the equivalent of four weeks’ leave annually for a full-time employee working 40 hours per week. Sick leave will also accrue from day one, removing the current six-month qualifying period.

Greater flexibility

Employees will be able to take annual leave in hourly increments, offering greater flexibility for different working arrangements. The new framework will also change how leave entitlements are recorded and calculated, making accurate records of contracted hours and working patterns increasingly important.

Public holidays and alternative leave

The Act introduces revised rules for determining whether a day is an otherwise working day, particularly for employees with irregular schedules. Alternative holiday entitlements will also move to an hours-based approach, affecting how leave is calculated for employees who work on public holidays.

Leave payment calculations

A revised payment framework aims to simplify the calculation of leave payments. Employers will need to review how remuneration components, including fixed allowances and variable payments, are treated under the new rules and ensure their payroll systems can accommodate the changes.

What should businesses do now?

Employers should use the transition period to review their employment agreements, leave policies, payroll systems and record-keeping practices. Particular attention should be given to employees with variable hours, casual arrangements or complex remuneration structures.

Early engagement with payroll providers, HR teams and legal advisers will help identify necessary changes and minimise disruption during implementation.

Importantly, the new rules cannot be adopted ahead of their commencement. Employers must continue to comply with the Holidays Act 2003 until the new framework takes effect, including addressing any existing leave-related underpayments.

How we can help

The Employment Leave Act 2026 represents a substantial change to New Zealand’s employment leave obligations. Preparing early will help businesses manage the transition and maintain compliance.

Our employment law team can assist with reviewing employment agreements and workplace policies, assessing payroll implications and developing a practical implementation plan tailored to your business.

Please contact Kim Proctor-Stephens if you would like advice on how the reforms may affect your organisation.