Employment leave bill passes final reading in Parliament

New Zealand's Employment Leave Bill has passed its third and final reading in Parliament, clearing the way for the biggest overhaul of the country's leave laws in more than two decades.

The legislation, passed on 29 July 2026, repeals the Holidays Act 2003 and replaces it with the Employment Leave Act 2026 – a system built around hourly, rather than weekly, leave calculations.

Workplace Relations and Safety Minister Brooke van Velden said the bill delivers on the Government's priority to replace the broken Holidays Act with a leave system which is simple and straightforward.

The current Holidays Act remains in force for now: a 24-month transition period will run before the new framework takes effect, giving employers, payroll providers and employees time to adjust.

What the Employment Leave Bill changes

The new Act introduces several structural changes to how leave is earned and paid. Annual and sick leave will accrue in hours rather than weeks, and employees will become entitled to annual, sick, bereavement and family violence leave from their first day on the job – rather than after a qualifying period, as under the current law.

Leave payments will be calculated using a single hourly rate, and a new 12.5% Leave Compensation Payment will apply to additional and casual hours worked. The reforms also introduce more detailed pay statements, greater flexibility for employees to cash up annual leave, a new "otherwise working day" test for staff with irregular schedules, and the removal of the parental leave annual leave payment penalty.

Ashlea Maley, director of operations at Peninsula New Zealand, said the scale of the change reflects how outdated the current law had become.

"This will be 23 years that we've had the Holidays Act in place, and the dialogue around it has really consistently been that it is confusing," she said.

"It was formed for a very antiquated kind of system – Monday to Friday, nine to five, 40 hours a week – when the reality of the workforce isn't that at all, particularly in an area like New Zealand where SMEs and that kind of irregular and intermittent working is quite common."

For more on how the legislation evolved from a first-reading proposal, HRD's earlier coverage of the bill clearing its first parliamentary hurdle traces the reforms employers were first asked to weigh in on.

The Holidays Act transition period

While the bill has now passed, it is not yet in force. Royal assent is expected shortly, triggering the 24-month implementation window. Maley said businesses should not treat that runway as a reason to wait.

"There's no excuses" once the two years are up, she said, adding that Peninsula is already helping clients "prepare both scenarios" – continuing current Holidays Act calculations where they benefit employees, while building the systems needed for the new hourly model.

One complication Maley flagged: some employees, particularly those with variable bonus or commission payments, may see their leave calculated differently under the new Act in ways that are less favourable in specific circumstances.

Maley's advice is not to shift those employees onto the new calculation method until the transition period ends, to ensure they remain no worse off. A closer look at the sweeping scope of New Zealand's toughest employment law reforms in decades sets this leave overhaul alongside other recent employment law changes HR teams are navigating at the same time.

Getting ready for the new Act

Maley's core message to senior HR professionals is to start early rather than wait for the deadline. "Definitely start preparing," she said, recommending businesses run both leave systems in parallel behind the scenes and begin updating employment documentation now – a task she expects many will be "dreading."

She was clear the transition applies equally regardless of company size: "Two years, everyone has to be across it. The law hasn't put any thresholds in for employee numbers or anything like that." Smaller employers without in-house HR expertise, she said, should look at bringing in outside support early.

Readers wanting the fuller policy detail behind the original proposal can revisit HRD's report on the Employment Leave Bill's proposed reforms when it was first introduced.

Despite the adjustment period ahead, Maley described the reform as a net positive. "It's a change that we're really excited about," she said. "It is going to be such a welcome breath of fresh air for small businesses, big businesses, payroll, HR."

She expects the next year to bring a learning curve for practitioners across the sector as everyone – including specialists like her – gets to grips with a law that will eventually replace the only leave framework most of the current HR workforce has ever known.