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The Employment Leave Act 2026 received Royal Assent on 6 August 2026, bringing the biggest Holidays Act changes in more than 20 years. Replacing the Holidays Act 2003 effective from 6 August 2028, the new act implements a simpler, fairer framework on how leave is earned, calculated and administered.
Employers have a two-year transition window, with the new Act taking effect on 6 August 2028 and a further year - until 6 August 2029 - to bring employment agreements into line. That timeframe may seem generous, but experience with past payroll transitions under the Holidays Act shows how quickly two years can pass.
Until commencement, nothing changes. The current Holidays Act rules continue to apply to every pay run between now and 6 August 2028. It is also worth noting that while the framework is now law, the finer detail and official guidance are still being worked through. Some settings could be refined before 2028, particularly with a general election due in November 2026. A change of direction is unlikely, but we are watching closely and will flag anything material.
If you have a specific question, jump straight to the FAQs.
Annual leave accrues from day one, based on standard hours worked at 0.0769 hours of leave per hour, instead of after a full year.
Sick leave scales with hours and can be taken in hours rather than whole days, accruing at 0.0385 hours per standard hour and capped at 160 hours unless a higher entitlement is agreed.
Every hour worked is classified as standard, additional or casual, and the category decides whether leave accrues. 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 - three days' bereavement leave for a close family member and one day for another bereavement the employer accepts, and up to 10 days of family violence leave in any 12-month period.
Employees can ask, once a year on the anniversary of their start date, to cash up to 25% of the annual leave balance they held the day before.
Public holidays use a new “otherwise working day” test.
Alternative holidays move to hours-based accrual, generally one hour for each hour worked on a public holiday.
A two-year transition period applies, with the Act commencing on 6 August 2028 and employment agreements to be aligned by 6 August 2029.
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.
Under the new Act, every hour an employee works falls into one of three categories, and that category decides whether leave accrues, whether a leave compensation payment applies, and what payroll has to record. The label used in the employment agreement does not decide the category; the actual obligations do.
Standard hours are hours the employer can require the employee to work and must pay for, whether or not the work is actually needed. These accrue annual and sick leave.
Additional hours are optional extras beyond standard hours: the employer does not have to offer them and the employee can refuse. No leave accrues; a 12.5% leave compensation payment applies instead.
Casual hours are hours where neither side is obliged - no obligation to offer work, no obligation to accept it. Again, no leave accrues and the 12.5% payment applies.
Two rules are worth committing to memory: the same role cannot mix standard and casual hours, and a role with no standard hours cannot have additional hours either. Working through every agreement and classifying each hour type is the first practical job for most employers, and it is the step that tends to surface the surprises.
The rules are easier to follow against an actual payroll. Take a Hawke’s Bay apple grower who runs a small permanent team year-round and scales up for a February to April harvest. Three people, three categories of hours, three different answers.
Ellen is guaranteed 40 paid hours a week at $34 an hour. One Thursday the rain sets in and work stops after six hours, but the guarantee means she is still paid for the full 40. All 40 are standard hours. For that week she accrues 3.076 hours of annual leave (40 × 0.0769) and 1.540 hours of sick leave (40 × 0.0385). The weather makes no difference to either figure.
John's agreement guarantees 32 hours across Monday to Thursday at $28 an hour. In peak weeks he is offered, and accepts, another eight hours on Friday, paid at time and a half. Those Friday hours are additional hours, and that distinction matters twice over — once in his weekly accrual, and again when a public holiday lands on a Friday.
Leave accrues on the 32 standard hours only: 2.4608 hours of annual leave and 1.232 hours of sick leave. The eight Friday hours accrue nothing. Instead, John receives a leave compensation payment of $28.00 (eight hours × $28 × 12.5%). It’s important to note which rate that is calculated on: his $28 ordinary rate, not the $42 he was actually paid for the work. We expect this to be the single most common error in the first year.
Sally picks on genuinely casual terms at $26 an hour, with no obligation on either side to offer or accept work. In a 34-hour week she is paid $884 in wages plus a $110.50 leave compensation payment (34 × $26 × 12.5%), for $994.50 in total. No annual or sick leave accrues. The $110.50 has to appear as its own line in her leave record - it cannot be quietly folded into her hourly rate.
Waitangi Day falls on Friday 6 February, six weeks into harvest. The same public holiday produces three different outcomes across the same orchard.
Ellen's agreement sets a Monday to Friday pattern, so Waitangi Day is an otherwise working day. She does not work it, and is paid for the eight hours she would have worked — $272 — with no leave balance used.
John's agreement covers Monday to Thursday, so Friday is not a working day under his pattern and Waitangi Day is not an otherwise working day for him. If the packhouse is closed that day, he is owed nothing for it. If he works it, as he often would in peak season, the hours he actually works still attract premium pay, but no alternative leave accrues. Either way, his Monday-to-Thursday accrual is unaffected.
Sally has no set pattern, so the 13-week look-back decides it: did she work, or take paid or unpaid leave, on at least half of the preceding 13 Fridays? She started on 6 January, so she has worked four of them. Four out of 13 is 31%, and Waitangi Day is not an otherwise working day for her — even though she has worked every day she was offered for six straight weeks.
That last one is the part worth planning around, and it catches people out. The 13-week look-back reaches back before your season starts, so public holidays early in the season will usually fail the test for seasonal staff, while the same holiday later in the season will usually pass it. By Easter, Sally would clear the threshold comfortably. Same worker, same orchard, same job, but opposite answer, decided by nothing more than where the holiday happens to sit in your season.
Nothing changes for your next pay run, or the one after that. But the work sits in front of the deadline, not on it. Seven moving parts sit inside this transition: employment agreements, employee engagement, leave policies, payroll systems, leadership capability, HR information systems 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
Classify every hour type in each agreement as standard, additional or casual
Set up written notional rosters where standard hours cannot otherwise be pinned down
Update leave and workplace policies
Assess payroll and leave processes for compliance gaps
Confirm your payroll system can calculate and separately record the 12.5% leave compensation payment
Plan the conversion of existing annual, sick and alternative leave balances ahead of commencement
Deliver training for leaders and HR teams
Build an implementation roadmap tailored to your business
30 July 2026: the Employment Leave Bill passed its third and final reading, and the Holidays Act 2003 is set to be repealed.
6 August 2026: the Employment Leave Act 2026 receives Royal Assent.
6 August 2026 to 6 August 2028: the implementation period during which employers and payroll providers must update their systems and processes. Current Holidays Act rules continue to apply until then.
6 August 2028: the Employment Leave Act 2026 commences, replacing the Holidays Act 2003 for all employers.
6 August 2029: the deadline for employment agreements to be aligned with the new Act.
No. The current Holidays Act rules apply to every pay run until 6 August 2028, so nothing changes about how your leave is calculated or paid today. What the two-year window is for is the preparation: classifying hours, reviewing agreements, and making sure your payroll system can handle the new requirements before they bite.
Not all leave is created equal, and neither are your employees' entitlements. Any leave you grant above the statutory minimum, or as an additional entitlement, is treated as its own leave type, so it's always clear what's owed and why. How it's calculated and paid comes down to what's set out in the individual employment agreement or Collective Agreement. That means the details can look a little different from one employee to the next, and that's exactly the point: entitlements should reflect the agreement in place, not a one-size-fits-all rule.
It depends where the holiday falls in your season. For seasonal workers with no set roster pattern, a public holiday is only an otherwise working day if they worked, or were on paid or unpaid leave, on at least half of that weekday across the preceding 13 weeks. Because that window reaches back before the season starts, early-season public holidays will often fail the test even for staff who have been working every available day, while the same holiday later in the season will usually pass it.
The Employment Leave Act 2026 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 standard hours worked, instead of after a qualifying period. The other major shifts are the classification of every hour as standard, additional or casual, 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 Act 2026 received Royal Assent on 6 August 2026 and replaces the Holidays Act 2003 on 6 August 2028. A two-year transition period applies before the new rules take effect.
Employers have a 24-month implementation period from Royal Assent on 6 August 2026 to update payroll, systems and processes, with full effect from 6 August 2028, and a further year - to 6 August 2029 - to align employment agreements. 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 a minimum of 12.5% of the employee’s ordinary hourly rate for each eligible hour - calculated on that ordinary rate even where the hours were actually paid at a higher overtime or penalty rate. It is paid on top of wages and must appear as its own line in the employee’s leave record. 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. Where the employment agreement specifies fixed days or a set pattern, the day is an OWD if the employee would have worked under that pattern. Where it does not, the 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. If the day is an OWD and the employee does not work, they are paid for the hours they would have worked, with no leave balance used. If they do work it, they receive premium pay of at least a 50% loading plus alternative leave, generally an hour for each hour worked. If it is not an OWD, there is no statutory public holiday payment for a day not worked.
Yes. Annual leave and sick leave both start accruing from an employee’s first day of employment, based on standard hours worked, rather than after 12 months or 6 months as under the current Holidays Act.
Yes. Employees will be able to ask once a year, on the anniversary of their start date, to cash up to 25% of the annual leave balance they held the day before that anniversary. This is 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 advisor.
September 2026.
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