The Employment Leave Act 2026 is now law. However, some details and implementation requirements could still change before the Act comes into force in August 2028. Fusion5 is monitoring developments and will update our guidance as material changes are confirmed.
Leave Remediation Consulting
Employment Leave Act 2026
The Holidays Act is being replaced. Is your payroll ready?
New Zealand's new Employment Leave Act changes how annual leave, sick leave and pay are calculated for every employer in the country. Here's what it means for employers, what to start looking at now, and how to prepare your payroll environment before the new rules take effect.
What's changing with the Employment Leave Act 2026?
The Employment Leave Act 2026 replaces the Holidays Act 2003 with an hours-based model for leave. It's a significant change to how leave is earned, tracked and paid.
Five changes every NZ employer needs to plan for
Hours-based accrual
Annual and sick leave will accrue against hours worked rather than days, replacing the current day-based system.
Leave compensation payments
Employers will pay 12.5% of ordinary hourly wages on additional and casual hours, instead of those hours accruing leave.
Immediate leave access
All employees, including casual staff, will have access to bereavement and family violence leave from day one.
Cashing up annual leave
Employees will be able to exchange up to 25% of their leave balance for cash, up from the current one-week limit.
Written notional rosters
Where agreements don't specify set hours, employers and employees will need to agree a written notional roster.
Aug 2026
Employment Leave Act receives Royal Assent
Nov 2026
New Zealand general election. Timeline could still shift.
2026–2027
Technical guidance released to payroll providers in stages.
Aug 2028
Act comes into force. New rules apply.
What to do to prepare for the Employment Leave Act 2026?
Preparing for the Employment Leave Act starts with understanding your position today. There are practical steps employers can take now to identify existing issues and prepare their people, processes and systems for the new leave rules.
Four things employers should be doing now
Get a clean baseline before the new rules land
Fusion5's Leave Remediation Consulting gives you an independent, practical review of how your organisation is currently calculating and paying leave — so you know exactly where you stand under the Holidays Act, before the Employment Leave Act adds a new model on top.
Recommended before 2028
Leave Remediation Consulting
- Independent audit of historical leave calculations against current legislation
- Clear identification and quantification of any shortfalls
- A practical, well-documented remediation plan your team can act on
- Policy and process recommendations to close the gaps going forward
- A clean compliance baseline ahead of the 2028 transition
Why now?
Remediation takes time. Records need to be gathered, calculations checked, and any corrections agreed with your people. Starting now means it's done well before attention shifts to the bigger job of implementing the Employment Leave Act itself.
Employment Leave Act 2026 FAQs
Is the Employment Leave Act 2026 now law, or could it still change?
When do New Zealand employers need to be ready for the Employment Leave Act?
The Employment Leave Act comes into force on 6 August 2028. The new leave rules will apply from an employee's first pay period beginning on or after that date. Employers should use the time before then to understand how the changes will affect their payroll systems, employment agreements, leave policies and processes.
Do I need to make changes to my payroll system now?
No. Employers should not make system changes before payroll software providers release updated versions and guidance explaining how the Employment Leave Act requirements will be supported.
There is, however, preparation you can do now. This includes checking that leave is being calculated correctly under the current Holidays Act, reviewing relevant employment agreements and policies, and asking your payroll provider about their roadmap for the new legislation.
What should employers do now to prepare for the Employment Leave Act?
Start by understanding your current position. Review employment agreements to identify provisions that may conflict with the new legislation, and consider a payroll system health check to confirm that leave is currently being calculated and paid correctly.
Where existing leave calculation issues are identified, addressing them before the new legislation takes effect can give you a cleaner baseline for the transition. Fusion5's HCM and payroll specialists can help with leave audits and remediation.
Where can I find official Employment Leave Act updates?
Employment New Zealand and the Ministry of Business, Innovation and Employment (MBIE) provide official information on the Employment Leave Act and Holidays Act reform, including guidance and implementation updates as they become available.
How will annual leave and sick leave accrual change under the Employment Leave Act?
The Employment Leave Act moves leave towards an hours-based model.
Annual leave will accrue based on hours worked rather than the current weeks-based entitlement. Sick leave will also accrue based on hours worked, replacing the current entitlement of 10 days after six months. This means employers will need to consider how their payroll systems calculate, record and report leave under the new rules.
What is the new leave compensation payment?
Under the Employment Leave Act, a leave compensation payment of 12.5% of ordinary hourly pay will apply to eligible additional hours and casual work.
The payment is intended to compensate employees for leave that would otherwise accrue on those hours. Employers will need to understand when the payment applies and ensure their payroll system can calculate and process it correctly.
Talk to a Leave Remediation specialist.
Tell us a little about your organisation and one of our HCM & payroll specialists will be in touch to talk through your current situation and whether a Leave Remediation Consulting engagement could help.
