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The Employment Leave Bill has passed its third and final reading, bringing the biggest Holidays Act changes in more than 20 years. Once in force, it replaces the Holidays Act 2003 with a simpler, fairer framework for how leave is earned, calculated and administered.
Employers will have a two-year transition window, with full effect from 2028. That timeframe may seem generous, but experience with past payroll transitions under the Holidays Act shows how quickly two years can pass.
If you have a specific question, jump straight to the FAQs.
Annual leave accrues from day one, based on hours worked, instead of after a full year
Sick leave scales with hours and can be taken in hours rather than whole days
Casual and additional hours stop accruing leave; a 12.5% leave compensation payment applies instead
Bereavement leave and family violence leave apply from day one, with no qualifying period
Employees can cash up to 25% of their annual leave balance every year
Public holidays use a new "otherwise working day" test
Alternative holidays move to hours-based accrual
A two-year transition period applies, with full effect from 2028
Although the end result is simpler, shift workers, seasonal staff and employees on variable rosters will find the transition itself more demanding before that simplicity arrives.
Two years feels generous until you're the one rebuilding payroll under pressure. The businesses that start planning now are the ones that won't be scrambling in 2028.”
Seven moving parts sit inside this transition: employment agreements, leave policies, payroll systems, HR information systems, leadership capability, employee engagement and leave approval processes. Getting ahead of the curve now means you can bring your people on the journey early, rather than scrambling as 2028 approaches.
This is a genuine opportunity to simplify your systems and position your organisation well for the future. It goes well beyond a compliance exercise, and it is not a payroll-only project. To land well, it will need HR, Finance and leadership working from the same plan, from the same start date.
Talk to your Findex advisor about how this applies to you.
The businesses that start now are the ones that will see a smooth transition: minimal disruption, no confusion, and a workforce that stays informed and engaged throughout. The ones that wait will be doing this under time pressure, with far less room to get it right.
To get ahead of these changes, we can help you:
Review employment agreements against the new requirements
Update leave and workplace policies
Assess payroll and leave processes for compliance gaps
Deliver training for leaders and HR teams
Build an implementation roadmap tailored to your business
30 July 2026: the Employment Leave Bill passes its third and final reading, and the Holidays Act 2003 is set to be repealed.
24 months from Royal assent: the implementation period during which employers and payroll providers must update their systems and processes. Current Holidays Act rules continue to apply until then.
2028: the Employment Leave Act takes full effect for all employers.
The Employment Leave Bill replaces the days-and-weeks system with hours-based leave. Annual leave and sick leave both accrue from an employee's first day, in proportion to hours worked, instead of after a qualifying period. The other major shifts are a 12.5% leave compensation payment for casual and additional hours, day-one bereavement and family violence leave, a 25% annual leave cash-up option, and a new “otherwise working day” test for public holidays.
Yes. The Employment Leave Bill has passed its third and final reading and will fully replace the Holidays Act 2003. A two-year transition period applies before the new rules take full effect, expected in 2028.
Employers have a 24-month implementation period from Royal assent to update payroll, systems and processes, with full effect from 2028. Current Holidays Act rules continue to apply until then.
The leave compensation payment (LCP) is a payment employers make on casual and additional hours in place of annual and sick leave accrual, set at 12.5% of those hours. It replaces the current 8% pay-as-you-go holiday pay arrangement for genuinely casual work.
The otherwise working day (OWD) test decides whether a public holiday would have been a working day for an employee without a set roster. Under the new test, a day counts as an OWD if the employee worked, or was on paid or unpaid leave, for 50% or more of that same day of the week in the preceding 13 weeks.
Yes. Annual leave and sick leave both start accruing from an employee's first day of employment, based on hours worked, rather than after 12 months or 6 months as under the current Holidays Act.
Yes. Employees will be able to cash up to 25% of their annual leave balance every year, an increase on the current cap.
Two years feels like a long runway today. It won't feel that way in 18 months. Talk to our HR and Payroll teams now, and we'll map exactly how the incoming Act changes your specific leave settings and payroll logic, so you have a clear, practical plan in place well before the deadline arrives.
Disclaimer:
Findex NZ Limited trading as Findex.
The views and opinions expressed in this article are those of the author/s and do not necessarily reflect the thought or position of Findex.
This article contains general information and does not constitute legal or taxation advice. If you need legal or taxation advice, we recommend you speak to a qualified adviser
August 2026.
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