17th December, 2025
The Holidays Act 2003 has shaped how leave entitlements are calculated and administered for more than 20 years, becoming a core part of payroll and employment practices across New Zealand.
With the Government now progressing significant reforms, a transition toward a new Employment Leave Act could see employers navigating the biggest change to leave legislation in more than two decades.
Here’s what we know so far, how the legislative process will unfold, and what MYOB is doing to ensure you’ll be supported every step of the way.
The existing Holidays Act has been notoriously difficult to interpret, with its complexity creating challenges and contributing to inconsistent interpretation, increased compliance risk, and administrative pressure for payroll teams.
The new Employment Leave Act aims to:
The Government’s objective is clear: to create a fairer, simpler system that works for today’s workforce.
Hours-based entitlements, increased transparency and clearer rules are at the centre of the proposed changes.
Leave entitlements (annual leave, sick leave) would begin accruing from the first hour of employment. Accrual will be calculated hour by hour based on the actual “contracted” hours the employee worked only, reducing ambiguity and eliminating the need for complex conversions to weeks or days.
Standard hours are the agreed hours of work for an employee, as set out in their employment agreement/contract. These should be clearly defined by their employer.
Note: The accrual rates are derived from the original standard full-time entitlement for someone working 40 hours per week (5 days).
This aims to provide predictable and transparent entitlements for both employers and employees.
A major change is the introduction of a 12.5% LCP in place of traditional accrual for:
This would replace the current 8% casual holiday pay and simplifies how non-standard hours are compensated.
Sick leave entitlements would reflect the hours actually worked, improving fairness and ensuring part-time staff receive proportional entitlements.
Leave payments would use a single hourly rate based on the employee’s base wage for the day of leave. Fixed allowances will be paid in full during leave; commissions and variable payments will not.
Employees would gain access to these leave types immediately upon starting work.
Parents returning from parental leave would receive full pay for annual leave, ending the current reduced AWE-only requirement.
Employees would be able to cash up 25% of their annual leave balance each year, increasing flexibility for both employers and workers.
A new 50% rule would determine whether an employee would have ordinarily worked the day. For example, if an employee has worked 7 out of 15 Mondays over the previous weeks, that day is treated as an otherwise working day for public holiday purposes.
Alternative holidays would accrue hour-for-hour.
The Minister for Workplace Relations & Safety, Hon Brooke Van Velden MP, is still aiming to pass the law before the 2026 General Election.
Once the Bill has gone through the regular legislative process, and after the Bill is passed, at this stage the Government is proposing giving employers and payroll providers a 24-month transition period to update systems, processes and employment agreements.
MYOB is mindful that strong guidance and education on the changes and how these will manifest in payroll software, needs to be delivered as part of the transition period. These components are integral to building familiarity and giving employers and payroll experts confidence around applying the new legislation.
Transition timeframes are still being determined and will be revealed in the draft Bill, with many employers and payroll practitioners noting ‘steer clear’ dates like the EOFY period, for example.
Existing obligations remain in force until the new law officially takes effect and employers will still need to resolve any issues identified under the current Holidays Act once new legislation comes into effect.
Ultimately, the new legislation won’t “reset” past obligations, historical leave miscalculations can still be raised and will need to be reviewed and remediated where required.
Supporting local businesses with their payroll needs for more than 30 years, MYOB knows that these legislative changes will be significant for employers, their payroll teams, and employees.
With a working group of payroll and product experts established to help ready our solutions, partners and customers for any transition, we are:
Our goal is to make compliance simple and ensure MYOB customers transition smoothly when the new rules take effect.
The transition to a new Employment Leave Act represents a major step toward a simpler and fairer leave system for New Zealand. Although the legislation is still in development, MYOB is committed to keeping you informed, prepared and supported with timely updates and software that evolves with your business.
Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.