Devil is in the Detail - Holidays Act Reform

The Employment Leave Bill was Introduced on 9 March 2026 and is set to replace the Holidays Act 2003.​ It has been referred to the Education and Workforce Committee and is due for a second reading by 13 July 2026.​

Problems with the Holidays Act 2003 are well known. This Bill has been described as achieving a simpler regime, with reduced administrative burden and compliance costs.​ The Bill includes a two-year transition period for employers to adapt to the new regime.

Annual Leave​

Under the Bill annual leave will now accrue from an employee’s first day of work, at a minimum rate of 0.0769 hours per standard hour of work.​ Annual leave also accrues during periods of paid statutory leave, parental leave, volunteer leave, and jury service.​ Annual leave will not accrue while receiving compensation from ACC.​ Annual leave is recorded in hours (not weeks) and balances are not adjusted if the number of standard hours changes (e.g. a person changes from full to part time).

Sick Leave​

Under the Bill sick leave will accrue from an employee’s first day of work, at a minimum rate of 0.0385 hours per standard hour of work.​ Employees can accumulate up to 160 hours (20 days for a standard 8 hour day, 5 days a week).​ Sick leave is taken in hours against standard hours and additional hours (e.g. hours worked under an availability provision or hours beyond those that are contracted that an employee can refuse).​

Bereavement Leave and Family Violence Leave​

These remain day-based entitlements but arise from the employee’s first day of employment. Employees may take part-days of these entitlements (e.g. a half day to attend a funeral).

Employees with Multiple Roles

Employees who perform multiple roles with the same employer will carry separate leave balances based on the hours worked in each role.

New Casual Leave Payment Plan​

A new Leave Compensation Payment (LCP) scheme is proposed to replace the current pay as you go holidays scheme. This covers not just annual, but also sick leave entitlements, meaning a casual worker cannot access annual or paid sick leave, being paid ‘as you go’. This is a significant change.​ The LCP is set at 12.5% of an employee’s ordinary hourly rate, paid for all causal hours worked.

Otherwise Working Day Test - Variable Employees​

An otherwise working day (OWD) test is created for determining entitlement to paid public holidays, this is for employees who do not have fixed days of work in their employment agreement.​ A day is an OWD if the employee has worked (or was on leave) for 50% or more of the same day of the week as the public holiday in​ the preceding 13 weeks.

Key Takeaways for Employers

The Bill changes holiday accrual compliance fundamentally and employers will need to be informed and ready to comply. We recommend that at this stage that employers:

• Consider the makeup of their workforce and the degree to which they will be impacted (e.g. high casual workforce)
• Consider the readiness of their payroll systems or payroll provider to ensure that they can ensure a smooth transition.
• Review leave entitlements in employment agreement and policies, noting that changes may be needed now to ensure the employer has not unintentionally created contractual entitlements.

Our team can assist with your leave compliance, including updating employment agreements and policies, as well as assisting with employee communications around the changes once they are implemented.

Disclaimer: We remind you that while this article provides commentary on employment law topics, it should not be used as a substitute for legal or professional advice for specific situations. Please seek guidance from your employment lawyer for any questions specific to your workplace.