The Holidays Act Is Being Replaced: What It Means for You

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The most complained-about piece of employment law in New Zealand is going. Here is what that means for your business, in plain English.

On 29 July 2026, Parliament passed the Employment Leave Act 2026. It received Royal assent on 6 August 2026 and it will replace the Holidays Act 2003 on 6 August 2028.

If you run a business and someone has forwarded you an alarming email about this, here is the short version: it's a genuine change, it's a good change on balance, and on our reading, there's nothing you need to do this month. The Holidays Act has drawn complaints for two decades — our take is that this is largely because it measures different kinds of leave in different units and then asks payroll systems to reconcile them. The new Act removes that reconciliation. What follows is what changes, what does not, and when any of it starts to matter for you.

Two people chatting over a laptop and a coffee mug at a wooden table.

The Dates That Matter

016 August 2026 — that's the date it received Royal assent. Nothing about your obligations changed on that date; it set the clock running.

026 August 2028 — the new rules take effect and the Holidays Act is gone. As we understand it, they apply from each employee's first pay period beginning on or after that date.

03Until then — the Holidays Act still applies in full. Your obligations today are exactly what they were last month, and stay that way until 2028.

Our reading is that the two-year gap is a deliberate choice — giving payroll providers and employers time to rebuild systems without doing it in a panic.

What Actually Changes

Three things, in plain terms.

011. How leave is earned. At the moment annual leave arrives as a lump — four weeks, on your anniversary. Under the new law, our understanding is that annual and sick leave will accrue from day one, in hours, against your standard hours. In practice, that should mean no more waiting twelve months for an entitlement to appear.

022. How leave is taken. As we read it, you'll use one hour of leave for every hour you take off, and part-days will be allowed. So, on that basis, if someone wants to leave at 2pm for a school thing, that would be two hours of leave, not a debate about whether it counts as half a day.

033. How leave is paid. One rate for everything. Different leave types are currently paid on different calculations, which in our experience is one of the biggest sources of Holidays Act errors. The new Act uses one hourly leave pay rate across every leave type.

As we understand it, that rate will be based on the lowest hourly rate that applies to the employee for the day the leave is taken. It is simpler, but for anyone who works across several different rates it is worth understanding before 2028 rather than after. Our reading is that fixed allowances will continue to be paid in full while someone is on leave.

Two Other Changes Worth Knowing

Casual and additional hours get a 12.5% payment. Casuals no longer accrue leave at all. Instead, casual hours and additional hours above someone's standard hours attract a 12.5% leave compensation payment on top of the pay for those hours. That is up from the current 8% pay-as-you-go rate.

Public holidays get a clearer test. The "otherwise working day" question — whether someone would have worked that day — is being given a clearer statutory test. Anyone who has had to critically review whether a casual was entitled to a public holiday will appreciate this.

What Does Not Change

You still get four weeks of annual leave equivalent — our reading is that this is a change in how leave is measured and paid, not a cut.
Public holidays are unchanged: still time and a half, still an alternative holiday where one is earned.
Parental leave, bereavement leave and family violence leave all continue to exist.
Our reading is that nothing you do between now and August 2028 needs to change on account of the new law — though it's still worth checking your own setup, which we cover below.

Where This Will Actually Bite

For a business with salaried staff on fixed hours, our expectation is that the transition will be close to invisible. In practice, your provider updates the system and life goes on.

It will be more work if you have people on variable hours, multiple rates, regular overtime, or a mix of casual and permanent staff — because the new framework draws firm lines between standard hours, additional hours and casual hours, and your employment agreements need to describe hours clearly enough to sit on the right side of those lines.

There is also a genuine wrinkle for people who earn commission or work across several different rates, because a single leave pay rate behaves differently from the current comparison method. If that describes some of your team, it is worth a proper look well before 2028 rather than the week it lands.

What to Do Now

For a lot of businesses the honest answer is still "not much". But that's only true if you're already compliant, and it's worth confirming rather than assuming — because, as we see it, the whole change comes down to a change of unit. Annual holidays are currently measured in weeks. Sick, bereavement, alternative, public holiday and family violence leave are measured in days. From 2028, as covered above, everything is expected to be measured in hours — so how much work this is for you depends almost entirely on whether your balances are in the right unit today.

If you are already measuring correctly. Annual holidays in weeks, and the day-based leave types in days. Your balances convert to hours on a defined basis, your provider does the conversion, and the migration is largely mechanical rather than a project.

If the units have drifted. Annual holidays tracked in days, or in hours, or in a mix depending on who set the employee up. The conversion is where that surfaces, and records may need correcting first — which is its own piece of work with its own scope.

If you already measure in hours. That's not necessarily a head start. Hours were not the unit the Holidays Act required for annual holidays, so a balance already sitting in hours still needs checking against what the Act actually says before it carries forward into the new regime.

None of that is urgent this month, and there is no early-adoption option to weigh up. What is worth doing at some point this year is checking that your employment agreements describe hours of work clearly — useful regardless of the new law, and in our view the thing most likely to cause grief in 2028 — and asking your payroll provider what their plan is. Not because you need the answer today, but because the answer tells you something about the provider.

We have been following this since it was a discussion document, and we are building for it now rather than in 2028. Our intention is that clients have very little to do at the changeover — which is rather the point of having someone else run your payroll.

Where something does need a decision from you, we will come to you well before the date, not after it.