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The Employment Leave Act 2026 is now law and will replace the Holidays Act 2003 in 2028.
For New Zealand employers, the most important message right now is:
Nothing changes today.
The Employment Leave Act received Royal Assent on 6 August 2026 and will come into force on 6 August 2028. Until then, employers must continue to follow the Holidays Act 2003 and cannot start applying the new leave rules early.
The new rules will apply from the beginning of each employee’s first pay period starting on or after 6 August 2028, so the transition will align with individual pay cycles.
That gives employers two years to understand the changes and prepare their systems and processes before the new framework takes effect.
What is changing under the Employment Leave Act?
The Employment Leave Act will make significant changes to how statutory leave is earned, taken and paid.
One of the biggest changes is the move to hours-based leave accrual.
Under the new system:
- Annual leave will accrue in hours from an employee’s first day of employment, based on their standard hours.
- Sick leave will also accrue in hours from day one.
- Annual and sick leave will accrue against standard hours rather than additional or casual hours.
- Additional and casual hours will receive a 12.5% Leave Compensation Payment instead of annual and sick leave accruing on those hours.
- Employees will use one hour of accrued leave for every hour of leave they take and will be able to take part days of leave.
- Alternative holidays will also move to hours-based accrual.
- Leave will be paid using the new hourly leave pay rate.
- A new Otherwise Working Day test will apply when determining public holiday entitlements. (MBIE)
Bereavement leave and family violence leave will also become available from the start of employment under the new framework.
Employees will be able to request to cash up up to 25% of the annual leave they accrue each year.
Compare the current and new leave rules
Want to see the changes side by side? Our downloadable comparison table shows the current Holidays Act rules alongside what will apply under the Employment Leave Act from August 2028.
What isn’t changing?
While the way leave is calculated will change considerably, many of the underlying minimum entitlements remain familiar.
Annual leave will remain equivalent to four weeks each year for employees with standard hours.
Sick leave will remain equivalent to 10 days each year for employees with standard hours, but it will accrue progressively in hours from day one rather than becoming available after a qualifying period.
Public holidays, bereavement leave and family violence leave will also remain protected statutory entitlements.
So, for many employers, the biggest adjustment will be how leave is earned, recorded, taken and paid.
What happens to existing leave balances?
Existing leave balances will need to transition into the new hours-based system.
Employment New Zealand has confirmed that employers will need accurate payroll data so existing leave balances can be converted when the new legislation takes effect. More detailed guidance on converting leave balances will be released during the implementation period.
That makes current Holidays Act compliance important.
Employment New Zealand recommends checking leave balances and leave pay calculations, fixing errors and completing any remediation that may be required.
Starting with accurate records will make the eventual transition easier. If current payroll data is wrong, those errors could carry into the new system and become more difficult to correct. (Employment New Zealand)
The Employment Leave Act will affect more than payroll
Much of the discussion around the new legislation has focused on payroll, but employers will eventually need to look more broadly at how the changes affect their business.
Employment New Zealand has identified a number of areas that may require review or changes before 2028, including:
- Payroll and payroll-related systems
- Employment agreements
- Workplace policies
- Pay statements and leave records
- Time and attendance systems
- Onboarding and rostering
- Leave tracking and employee records.
Employment agreements may need updating to accurately reflect employees’ hours of work, align with the new leave entitlements and leave pay rules, address new requirements affecting leave balances in some circumstances, and replace references to the Holidays Act 2003.
Workplace policies covering leave and holidays, pay and allowances, record-keeping, annual closedowns and family violence support may also need to change.
For organisations with a large workforce, collective agreements or complex working arrangements, there may be a significant amount of work involved.
That doesn’t mean everything needs to be changed now.
When will employment agreements need to change?
Employment New Zealand recommends employers aim to have their employment agreements updated by 6 August 2028.
There will be an additional transition period until 6 August 2029 for agreements that have not been updated by the time the Act comes into force.
During that additional year, employers will need to comply with both the employment agreement and the Employment Leave Act. Where they provide different entitlements, the employer will need to apply whichever is more favourable to the employee.
Employers also cannot make changes to employment agreements without discussing and agreeing those changes with employees first.
Employment New Zealand says employers with collective agreements coming up for renegotiation, large numbers of employees or complex working arrangements can start planning earlier because updating their agreements may require more time.
What should NZ employers do now?
There is no need to rush into changing payroll settings, employment agreements or workplace policies.
Employment New Zealand’s implementation timeline specifically states that no action is required for employers at this stage, from August to October 2026. The Holidays Act remains in force and continues to apply.
For now, employers can focus on understanding what is coming and keeping their current records and compliance in good order.
This includes:
- Continue complying with the Holidays Act 2003.
Current leave and holiday obligations remain unchanged. - Make sure payroll and leave data is accurate.
Check current leave balances and calculations and address existing compliance issues. - Understand the new framework.
Consider how significant the eventual transition may be for your workforce and systems. - Stay in touch with your payroll provider.
Payroll software will need to support the new rules, and providers are now preparing for those changes. - Watch for further official guidance.
Employer-specific guidance is scheduled to start being released from November 2026, with further resources following throughout the implementation period.
More detailed guidance on employment agreements, policies, leave balance conversions and complex working arrangements is still to come.
Preparing for the Employment Leave Act
The Employment Leave Act represents a significant change to New Zealand’s leave framework, but employers have time to prepare.
Right now, the priority is to continue meeting your existing Holidays Act obligations and understand what is coming.
As further guidance becomes available, employers can work through any required changes to employment agreements, workplace policies and HR processes in a planned way ahead of 2028.
If you need support with your current employment agreements, workplace policies or HR compliance, or want advice as the Employment Leave Act implementation progresses, talk to our team.
FAQs
The Employment Leave Act comes into force on 6 August 2028, two years after receiving Royal Assent. The new rules will generally apply from the beginning of an employee’s first pay period starting on or after that date.
Yes. Annual leave will accrue progressively in hours from day one against an employee’s standard hours under the new system.