The Holidays Act Has Been Replaced
Parliament passed the Employment Leave Act 2026 on 29 July 2026, scrapping the Holidays Act 2003. Here's what changes for your annual leave, sick leave and holiday pay — and why nothing changes for you until 2028.
New Zealand has spent the better part of a decade trying to fix the Holidays Act 2003. It's the law behind the payroll remediation scandals that saw employers — including government agencies — collectively owe hundreds of millions of dollars in back pay, largely because working out a single day's holiday pay required comparing several different formulas.
The replacement scraps the "weeks" model entirely. Under the Employment Leave Act 2026, leave is measured in hours, accrues from your first day, and is paid at one consistent hourly rate.
What actually changes
| Now (Holidays Act 2003) | From 2028 (Employment Leave Act 2026) | |
|---|---|---|
| Annual leave | 4 weeks, granted in a lump on your 12-month anniversary | Accrues from day one at 0.0769 hours per hour worked (that's 4/52 — still about 4 weeks a year for full-timers) |
| Sick leave | 10 days after 6 months, then each year — the same 10 days whether you work 1 day a week or 5 | Accrues from day one at 0.0385 hours per hour worked (2/52), capped at 160 hours — now proportional to the hours you actually work |
| Casual / extra hours | 8% pay-as-you-go holiday pay | 12.5% leave compensation payment paid on top of the hourly rate |
| How leave is paid | Compare "ordinary weekly pay" and "average weekly earnings", take the higher — the source of most payroll errors | One hourly leave pay rate for every leave type, based on your base wage |
| Taking leave | Generally in whole days or weeks | Can be taken in hourly increments |
| Cashing up | Up to 1 week of your 4 weeks per year, employer can decline | Up to 25% of your annual leave per year after your anniversary |
| Public holidays | "Otherwise working day" judged case by case — often disputed | Clearer test: you qualify if you worked 50% or more of that weekday in the previous 13 weeks |
Annual leave: same amount, earned differently
The headline number doesn't change for most people. Accruing 0.0769 hours of leave for every hour you work comes to roughly four weeks a year if you work full-time — the maths is deliberately set to 4/52.
What changes is when you get it. Today you wait until your 12-month anniversary for entitled leave to appear as a lump; before that you have no entitled leave, just an 8% accrual you'd be paid out if you left. From 2028 your balance ticks up with every hour you work, and you can use it as you earn it. That also removes the awkward "leave in advance" conversation many people have in their first year.
What it means for final pay
This is the part that most affects the calculators on this site. Today, leaving a job means untangling two separate things: your entitled leave (paid at your normal rate) and an 8% accrual on everything you've earned since your last anniversary. From 2028 that split disappears — you have one balance of accrued hours, and you're paid out for whatever you haven't used.
An honest caveat: the detailed rules for final pay under the new Act haven't been published in official guidance yet. What's clear is the direction — one continuous balance, no 12-month cliff, no separate 8% top-up. We'll update this page and rebuild our calculators once MBIE publishes the detail, well before the 2028 switchover.
Sick leave: the most contested change
Sick leave becomes proportional to hours worked, accruing at 0.0385 hours per hour (2/52) with a cap of 160 hours. For a full-time employee that works out to about the same 10 days a year, with the cap sitting where the current 20-day maximum does.
For part-time workers it's a real reduction. Under the current law, someone working two days a week gets the same 10 days of sick leave as someone working five. Under the new model they accrue proportionally — so roughly four days' worth instead of ten.
This was the main point of opposition during the Bill's passage. Labour and the Greens argued it leaves part-time and irregular workers materially worse off, and unions submitted that sick leave is a health entitlement that shouldn't scale with hours — noting the change falls disproportionately on women, who make up the majority of part-time workers. The Government's position is that proportionality is fairer between employees and removes the incentive to game short-hours contracts.
Casual workers: 8% becomes 12.5%
If you're casual, or you work hours on top of your contracted hours, you won't accrue leave on those hours. Instead you get a leave compensation payment of 12.5% on top of your hourly rate, paid at the time you work them.
That's a meaningful uplift from the current 8% pay-as-you-go holiday pay — because the 12.5% is compensating you for both annual leave and sick leave, rather than annual leave alone. For most casuals it should mean more in the hand per hour worked.
Other changes worth knowing
- Bereavement and family violence leave become available from day one for eligible employees (and after three months for others), and bereavement leave covers a wider set of family relationships.
- Alternative holidays ("days in lieu") accrue hour for hour when you work a public holiday, rather than as a whole day.
- Bonuses and commissions are excluded from the leave pay rate, which removes the long-running argument about whether a payment is "truly discretionary". Fixed allowances still continue while you're on leave.
- Parental leave gets a separate, earlier fix: from 1 July 2027, annual leave taken after returning from parental leave is paid at your full normal rate, ending the penalty where returning parents were paid a reduced average.
When it all happens
- 9 March 2026 Employment Leave Bill introduced to Parliament; first reading 12 March.
- 29 July 2026 Bill passes its third and final reading, replacing the Holidays Act 2003.
- Royal assent (expected 2026) The Act becomes law and the 24-month countdown starts.
- 2028 — the switchover The new leave system takes effect. First pay runs under the new rules. Employers get a further year to bring individual employment agreements into line.
- Ten years after assent The state schooling sector transitions, having been given a much longer runway.
What you should do right now
Honestly — nothing. This is a payroll and systems problem for the next two years, which is exactly why employers were given a 24-month lead-in. Your entitlements today are unchanged, and if you're leaving a job this week your final pay is still worked out under the Holidays Act 2003.
The one thing worth doing is checking your current leave balance on your payslip, since accurate balances are what will be carried across when the switchover happens.
Frequently Asked Questions
Common questions about the Employment Leave Act 2026.
Has the Holidays Act 2003 been repealed?
Yes. Parliament passed the Employment Leave Act 2026 on 29 July 2026, which replaces the Holidays Act 2003 in full. However, the new Act does not take effect until 2028 — two years after Royal assent — so the Holidays Act 2003 still governs your leave and holiday pay until then.
When do the new leave rules start?
In 2028, 24 months after the Act receives Royal assent. Employers then get a further year to update individual employment agreements. The state schooling sector has a much longer transition of ten years after assent.
Am I losing my 4 weeks of annual leave?
No. The accrual rate of 0.0769 hours per hour worked equals 4/52 — about four weeks a year for a full-time employee. The difference is that it builds up hour by hour from your first day instead of arriving as a lump on your 12-month anniversary.
Is sick leave being cut for part-time workers?
In effect, yes. Sick leave will accrue in proportion to the hours you work (0.0385 hours per hour, capped at 160 hours) rather than being a flat 10 days for everyone. A full-time worker still gets roughly 10 days a year, but someone working two days a week would accrue closer to four. This was the most contested part of the Bill, with Labour, the Greens and unions arguing it leaves part-time workers — disproportionately women — worse off.
What happens to the 8% holiday pay rule?
For casual workers and extra hours, the 8% pay-as-you-go holiday pay is replaced by a 12.5% leave compensation payment paid on top of your hourly rate. It's higher because it compensates for both annual leave and sick leave rather than annual leave alone. Until 2028 the 8% rule still applies.
Will my final pay be calculated differently?
From 2028, yes. Today your final pay separates entitled leave from an 8% accrual on earnings since your last anniversary. Under the new Act you'll have a single balance of accrued leave hours, paid out at your hourly leave pay rate. Detailed official guidance on final pay under the new rules hasn't been published yet.
Do I need to do anything now?
No. The changes are an employer and payroll systems obligation, which is why there is a two-year lead-in. Your entitlements are unchanged until 2028. It is worth checking that the leave balance on your payslip looks right, since balances will carry across at the switchover.
Are the public holidays themselves changing?
No — the public holidays themselves stay the same. What changes is the test for whether a public holiday falls on a day you would otherwise have worked. Instead of a case-by-case judgement, you qualify if you worked 50% or more of that weekday in the preceding 13 weeks. Alternative holidays for working a public holiday will accrue hour for hour.
Calculators & Official Sources
Current rules still apply — these calculators are up to date.
Final Pay Calculator →
Work out what you're owed when you leave, under the current rules.
Annual Leave Calculator →
Check your 4-week entitlement date and 8% holiday pay.
MBIE: Leave Reform →
Official Government information on the Employment Leave Bill.
Employment NZ Update →
Official guidance will be published here once the Act receives assent.