Holidays Act Replacement Passed: What Employers Need to Do Before 2028

Friday 31 July, 2026

If you employ staff in New Zealand, the way you manage and pay leave is about to change significantly.

On 29 July 2026, the long-awaited replacement of the Holidays Act 2003 (the Act), the Employment Leave Bill (the Bill) passed its third reading in Parliament. It will soon pass into law once it receives Royal Assent, which is expected in the coming weeks. The Bill replaces the Act in its entirety.

Employers will need to update their payroll systems and how they manage leave. The purpose of the Bill is to simplify leave entitlements for employers and employees to make compliance easier.

Why Replace the Holidays Act 2003?

The Holidays Act 2003 became notorious for its complexity. Many large employers discovered years of payroll errors stemming from unclear entitlement rules, leading to costly back-pay exercises. The Employment Leave Bill is the result of years of review and is designed to fix those problems with a simpler, more consistent framework.

Timeline and Implementation

The majority of the Bill comes into force two years after it receives Royal Assent (commencement) meaning employers have time to digest the changes and adjust their systems and employment agreements.

However, two provisions come into force earlier: regulations governing the process for correcting past payroll errors and amendments to the Parental Leave and Employment Protection Act.

Within the year following the Bill’s commencement (three years after Royal Assent), employers must comply with the Bill. They must also ensure their employment agreements entered into before commencement comply, with agreement terms prevailing where they are more favourable to the employee.

However, the Bill does not apply to the primary and secondary education sector until 10 years after Royal Assent, unless an earlier date is specified by Order in Council.

What is Actually Changing? 

The Bill introduces the following key changes:

• The Bill differentiates between standard hours, additional hours and casual hours.
• All annual and sick leave entitlements are now consistently expressed in hours.
• Annual leave accrues at a minimum rate of 0.0769 hours for each standard hour or part of a standard hour of work.
• Sick leave accrues at a minimum rate of 0.0385 hours for each standard hour or part of a standard hour of work up to the maximum accrual level of 160 hours.
• Casual employees and employees working additional hours do not accrue annual leave or sick leave on those hours. Instead, they attract the Leave Compensation Payment, an additional 12.5% of the employee's ordinary hourly rate, paid in lieu of those entitlements.
• Employees who work standard hours accrue annual, sick, bereavement and family violence leave from the beginning of their employment.
• Employees are entitled to a paid public holiday if it falls on a day they would normally be working. This is determined by their employment agreement, or if the pattern is unclear, by whether the employee worked that day on at least half the occasions in the previous 13 weeks.

What Should Employers Do Now?

Employers should review and begin the process of updating employment agreements. For smaller employers this may not be such a large task but for large organisations, this could take some time. There is sufficient time built in to allow for compliance.

Employers should also start recording of all employees’ standard, additional and casual hours. This will be important for determining leave entitlement. All organisations, especially large and public service organisations, should begin engaging their payroll providers now to ensure systems are ready when the Bill takes effect.

The Employment Leave Bill is extensive and represents a significant overhaul of leave entitlements. Key priorities for employers right now are auditing how they classify employee hours, reviewing employment agreements, and engaging with payroll providers about system upgrades. Our Employment team is well-placed to help with all of these. If you have questions about how the Bill affects your business, please get in touch.

Reviewing your employment agreements ahead of 2028? Contact our Employment Team.

This publication is for general information only and is not legal advice. Seek specific advice for your situation.