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The Holidays Act 2003 has shaped how leave entitlements are calculated and administered for more than 20 years. It has also become a source of complexity and uncertainty for employers, employees and payroll teams.
To address this complexity, the New Zealand Government introduced the Employment Leave Act 2026. The Act - granted Royal Assent on 6 August 2026 - will repeal and replace the Holidays Act and significantly change how leave is earned, recorded, paid and taken.
Supporting local businesses with their payroll needs for more than 30 years, MYOB knows these changes will be significant for employers, payroll teams and employees.
MYOB’s goal is to make the transition as clear and manageable as possible, with the right information available at the right time. Our payroll and product experts are mapping the changes required for each of our payroll solutions, and the two-year transition window from the date Royal Assent is granted gives us time to make these changes carefully, test them thoroughly and deliver the practical enablement support businesses need before the new rules take effect.
Here’s what we know about the new framework, what happens next and how MYOB is preparing to support customers through the change.
Why the change
The existing Holidays Act has been notoriously difficult to interpret, with its complexity creating challenges and contributing to inconsistent interpretation, increased compliance risk, administrative pressure for payroll teams and workers not receiving their current entitlements.
The Employment Leave Act 2026 aims to:
Simplify leave calculations
Improve clarity and transparency
Reduce compliance costs
Make leave entitlements easier to understand and manage
Better reflect modern working arrangements
Overall, the Government’s aim was to create a simpler system that works for today’s workforce and gives employers more confidence in their payroll calculations.
What’s changing: Key reforms
Hours-based entitlements, clearer working-hour categories and more transparent leave payments are at the centre of the new system.
1. Annual and sick leave will move to an hours-based accrual system
Annual leave will accrue from an employee’s first day of employment, against their standard hours, rather than becoming available in larger blocks after set service milestones.
It will be recorded and taken in hours, at a minimum rate of 0.0769 hours for every standard hour of work. This means employees will be able to take the hours of leave they need, rather than having to convert leave into days or weeks.
Sick leave will also accrue from an employee’s first day of employment, against standard hours. It will be recorded and taken in hours, at a minimum rate of 0.0385 hours for every standard hour of work, up to a maximum accrued balance of 160 hours. Employers and employees can agree to additional sick leave.
Annual leave balances will also be banked in hours and they will not automatically increase or decrease if an employee’s standard hours change.
A note on notional rosters: Where an employment agreement does not clearly set out an employee’s standard hours, days or times, the employer and employee will need to agree a written notional roster. This roster should accurately reflect an employee’s intended pattern of standard hours and will help determine leave accrual and when leave can be taken.
2. More flexibility around annual leave
There are several changes to how annual leave can be taken and paid:
Employers will be able to allow employees to take annual leave in advance, before it has accrued
Employees will be able to request payment for up to 25% of their annual leave balance in each 12-month period. Employers won’t be able to require employees to cash up leave and can decline a request
3. Working hours will be classified, with a 12.5% ‘Leave Compensation Payment’ for some hours
The Act distinguishes between three types of working hours:
Standard hours: Hours an employee is required to work under their employment agreement, and that their employer must pay them for
Additional hours: Hours the employer is not required to make available under the employment agreement, which the employee can refuse, including hours worked under an availability provision
Casual hours: Hours worked where the employment agreement does not require the employer to offer work or the employee to accept it
Annual and sick leave won’t accrue on additional or casual hours. Instead, employees will receive a Leave Compensation Payment (LCP) of 12.5% of their ordinary hourly rate for those hours.
4. Leave payments will use a consistent hourly method
The Employment Leave Act will replace the current range of leave payment calculations with a consistent hourly approach.
For salaried employees, the rate is based on the amount payable for one standard hour’s work
For waged employees, it is based on the lowest hourly rate payable for the continuous shift during which leave is taken
Fixed allowances that are required under an employment agreement and don’t vary in value, will be paid during leave
There are also specific rules for employees paid partly or wholly by piece rates or commission, including minimum payment protections.
5. Parental leave payments and annual leave accrual will change
The new Act also changes how annual leave accrues while an employee is on parental leave, and how parental leave payments are calculated.
Annual leave will be based on the employee’s standard hours immediately before parental leave starts, or immediately before a temporary change to those hours begins if the change was agreed in the three months before leave.
Parental leave payments will be calculated using the employee’s average gross weekly earnings from the relevant pay periods. These amendments will apply to parental leave payment applications received on or after 1 July 2027.
6. Bereavement and family violence leave will have new eligibility rules
Employees will be able to access bereavement leave and family violence leave from their first day of employment. This includes casual employees.
These entitlements will remain day-based, although the new rules provide greater flexibility when leave is taken in whole or part days.
Notably, the Employment Leave Act also expands the types of family members covered by the three-day bereavement leave entitlement.
7. Public holiday and alternative leave rules will be clearer
The new Act introduces a clearer test for deciding whether a day is an Otherwise Working Day (OWD) for employees whose employment agreements don’t specify days or a pattern of work. This will apply to public holidays and help determine when public holiday entitlements apply.
The test will look at whether the employee worked, or was on paid or unpaid leave, on 50% or more of the same day of the week during the previous 13 weeks. It can also apply where an employment agreement specifies some days, but the employee has worked additional days.
When an employee works a public holiday that is an otherwise working day, their alternative leave entitlement will accrue hour-for-hour. Here, accurate records of hours, work patterns and leave will be important.
8. Pay statements, record keeping and annual closedowns will change
New Zealand employers will need to provide pay statements that clearly itemise pay and leave information for each pay period in which an employee works or is on paid leave. The new framework also includes additional record-keeping requirements for working hours, rosters, leave and public holiday calculations.
Annual closedowns will also have clearer rules, including one closedown period starting in each calendar year and written notice to affected employees at least 21 days before a closedown.
What happens next?
In terms of key timings:
The parental leave amendments will come into force on 1 July 2027
Most of the new leave framework will come into force two years from the date of Royal Assent, which will be 6 August 2028
Employers will have one additional year after the main commencement date above, to update specified employment agreement terms
This lead-in period is intended to give employers, payroll providers and employees time to understand the changes, and update systems, processes, records, policies and employment agreements.
Until the new leave framework comes into force, employers must continue to comply with the current Holidays Act.
Transition considerations
Employment New Zealand has updated its website with a timeline for the release of guidance on the reforms, along with suggested preparation activities for employers and other stakeholders. You can view the Employment New Zealand information here.
MBIE’s policy team has also published further information about the new Act and reform changes on its website and this information can be found here.
We’ll keep you updated
The move to a new Employment Leave law is a significant change for New Zealand employers and employees.
MYOB will continue to keep customers informed about what the changes mean for their payroll solution and the steps they may need to take.
For more details on the changes, see the Employment Leave Bill on the New Zealand Legislation website or refer to the official MBIE page.
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.
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