The Government has introduced the New Employment Leave Bill, which passed its first reading in Parliament.
The Bill has been referred to the Education and the Workforce Committee, which is scheduled to report back on the 13th of July 2026. The Committee may call for public submissions and commentary before finalising its report.
The current Holidays Act has been widely regarded as unclear, overly complex, and difficult for payroll systems to apply, contributing to widespread non‑compliance.
The new Bill aimed to create a simpler, clearer leave framework, improve certainty for both employers and employees, reduce payroll errors and make entitlements easier to automate across varied working patterns.
Ashlea Maley, Associate Director - Operations, Peninsula New Zealand, said the introduction of the new Employment Leave Bill was a welcome step toward simplifying what has long been a complicated and often confusing area of employment law for New Zealand businesses.
“The current Act presents a challenging framework for employers and payroll providers to navigate, so a clearer, more consistent framework is a positive development for long-term sustainability,” said Maley.
“Once the Bill becomes law, businesses will have a two‑year implementation period. This is a valuable opportunity for small businesses to update their systems, understand the new entitlements, and ensure their payroll processes are set up correctly.”
Rather than seeing it as an administrative burden, Maley encouraged employers to take full advantage of this transition period to upskill themselves regarding their obligations and make adjustments to their payroll and compliance policies accordingly.
“Overall, simplifying leave calculations and entitlements is a constructive move that will help businesses adapt more easily and reduce the red tape around business operations.”
Key Changes
1. New leave structure
- A new model defines three types of working hours:
- Standard hours (contracted hours)
- Additional hours (hours beyond standard that attract extra pay)
- Casual hours (no guaranteed work pattern)
2. Leave entitlements (start from Day 1)
- Annual leave: Accrues in hours from day one
- Sick leave: Accrues from day one based on hours worked (accrual capped at 160 hours)
- Bereavement & family violence leave: Day‑based, part‑days allowed
- Public holidays: New “otherwise working day” test for variable work patterns
- Alternative leave: Accrues at one hour per hour worked on a public holiday
3. Leave payments
- All leave is paid using one hourly rate, simplifying calculations
- 12.5 percent Leave Compensation Payment (LCP) applies to additional and casual hours instead of accruing leave
Most changes take effect two years after Royal Assent, allowing employers and payroll providers time to update systems, employment agreements, and internal processes. The State schooling sector will have up to ten years to implement changes.
The New Employment Leave Bill delivers a simpler and more workable leave system. By streamlining entitlements and standardising calculations, it is expected to reduce compliance risk and provide clearer, more consistent outcomes for both employers and employees.
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