New Zealand’s Holidays Act 2003 is being replaced by the Employment Leave Bill 2026, introduced to Parliament in March 2026. The new law fundamentally changes how leave accrues, is recorded, and calculated — moving from days/weeks to hourly accrual from day one of employment.
This guide explains what changes, when they take effect, and what employers need to do to prepare for the transition.
Key Takeaways
- The Employment Leave Bill 2026 replaces the Holidays Act 2003 with a 24-month transition period
- Annual leave and sick leave accrue from DAY ONE (currently starts after qualifying periods)
- Leave is recorded in HOURS, not days or weeks
- Sick leave is capped at 160 hours (20 days for a 40-hour week)
- A new 12.5% Leave Compensation Payment (LCP) replaces the 8% holiday pay option for casuals
- All leave (bereavement, family violence) is available from day one
- Submissions on the Bill close 14 April 2026 — details may change before implementation
What Is the Employment Leave Bill 2026?
The Employment Leave Bill 2026 is legislation introduced to Parliament in March 2026 to modernise and simplify New Zealand’s leave laws. It addresses widespread non-compliance issues identified by the Holidays Act Taskforce, particularly for irregular and casual workers.
Current status: Passed first reading, referred to Education and Workforce Committee. Submissions close 14 April 2026.
Implementation timeline: 24-month transition period after Royal Assent (the exact implementation date is TBD as of April 2026).
Disclaimer: Details in this guide are based on the Bill as introduced. The final legislation may differ after committee review and Parliamentary debate. Employers should monitor official Employment New Zealand updates.
Key Changes: Annual Leave
Accrual From Day One
Current law: Annual leave accrues after 12 months of continuous employment (4 weeks entitlement).
New law: Annual leave accrues from day one at 0.0769 hours per hour worked (equivalent to 4 weeks/year for full-time employees).
Impact: No more waiting 12 months for leave entitlement. Employees start accruing leave immediately.
Hourly Recording
Current law: Annual leave is recorded in days or weeks.
New law: Annual leave is recorded in hours and can be taken in partial-day increments.
Impact: Greater flexibility for employees taking leave in partial days. Employers must upgrade time and attendance systems to track hourly leave balances.
Annual Leave Amounts Remain the Same
The total annual leave entitlement does NOT change — still 4 weeks per year for full-time employees. Only the ACCRUAL MECHANISM changes.
Accrual During Paid Leave
Annual leave continues to accrue during:
- Paid annual leave
- Sick leave
- Bereavement leave
- Family violence leave
- Volunteer leave
- Jury service
Annual leave does NOT accrue during:
- Unpaid leave
- ACC periods
Cashing Out Annual Leave
Current law: Maximum cash-out is 1 week per year.
New law: Employees can cash up to 25% of annual leave balance annually.
Impact: Greater flexibility for employees who need cash instead of time off.
Key Changes: Sick Leave
Accrual From Day One
Current law: Sick leave accrues after 6 months of continuous employment (10 days entitlement).
New law: Sick leave accrues from day one at 0.0385 hours per standard hour worked (equivalent to 10 days/year for full-time employees).
160-Hour Cap
Sick leave is capped at a maximum of 160 hours (equivalent to 20 days for a 40-hour week). Once an employee reaches 160 hours, sick leave stops accruing until it is used and falls below the cap.
Accrual Against Standard and Additional Hours
Sick leave accrues against:
- Standard hours (normal contracted hours)
- Additional hours (overtime, extra shifts)
The calculation uses total hours worked, distinguishing between standard and additional hours for accrual purposes.
Sick Leave Taken in Hours
Like annual leave, sick leave is taken in hours (not days), allowing partial-day sick leave.
Key Changes: Bereavement and Family Violence Leave
Available From Day One
Current law: Bereavement leave and family violence leave require 6 months of qualifying employment.
New law: Both leave types are available from day one of employment.
Part-Day Leave
Both bereavement leave and family violence leave can be taken in part-day increments (not just full days).
Entitlements Remain Unchanged
The amount of each leave type remains the same:
- Bereavement leave: 3 days for immediate family, 1 day for others
- Family violence leave: 10 days per year
Key Changes: Leave Compensation Payment (LCP)
What Is LCP?
The new 12.5% Leave Compensation Payment (LCP) replaces the current 8% holiday pay option for casual and additional hours.
When it applies: Paid on all additional and casual hours worked.
Calculation: LCP = Additional/casual hours × Hourly rate × 0.125
How LCP Differs from 8% Holiday Pay
Current 8% holiday pay: Only applies to irregular/casual hours where the employer and employee agree in advance. Paid as a lump sum (usually annually).
New 12.5% LCP: Applies automatically to ALL additional and casual hours. Paid in each pay period with regular wages.
Example: LCP Calculation
Casual employee works 30 hours in a week at $25/hour:
- Standard hours: 0 (casual has no standard hours)
- Additional hours: 30 hours
- LCP: 30 × $25 × 0.125 = $93.75
Weekly pay: $750 (30 hours × $25) + $93.75 (LCP) = $843.75
Key Changes: Public Holidays
Alternative Holiday Accrual
Current law: Alternative holidays are full-day entitlements.
New law: Alternative holidays accrue at 1 hour per hour worked on a public holiday.
Impact: Employees who work only part of a public holiday accrue a proportional alternative holiday (not the full day).
Time-and-a-Half Continues
Employees who work on a public holiday still receive time-and-a-half pay. This does not change.
Key Changes: Pay Statements
Itemised Pay Statements Required
Employers must provide itemised pay statements showing:
- Hours worked (standard and additional hours)
- Leave taken in hours
- Leave balances in hours
- LCP amount (if applicable)
- Leave Compensation Payment details
Frequency: With every pay period.
Transition Timeline
Implementation Period
- Bill introduced: March 2026
- First reading: Passed
- Committee submissions close: 14 April 2026
- Royal Assent: TBD (expected late 2026)
- Implementation begins: 24 months after Royal Assent
- State schooling sector: 10-year transition period (special case)
Converting Existing Balances
When the new law takes effect, existing leave balances (recorded in days/weeks) will be converted to hours. The conversion method will be specified in the implementation regulations.
Example: Employee has 5 days annual leave under current law. Under new law, this converts to 40 hours (assuming 8-hour days).
Employer Implementation Checklist
1. Upgrade Time and Attendance Systems
Required: Your payroll and leave management system must:
- Track leave accrual in hours (not days/weeks)
- Calculate hourly accrual rates (0.0769 for annual, 0.0385 for sick)
- Apply 160-hour sick leave cap
- Calculate LCP on additional/casual hours
- Provide itemised pay statements with hourly breakdown
Action: Contact your software provider or upgrade to a system that supports the new requirements. Leave Balance is updating to support New Zealand hourly accrual when the Bill takes effect.
2. Update Employment Agreements
Required: Update templates to reflect:
- Leave accrual from day one
- Hourly recording of leave
- LCP entitlement for casual/additional hours
- Part-day leave availability
Action: Review and amend all employment agreement templates. New agreements from implementation date must comply with the new law.
3. Train HR and Payroll Teams
Required: Train staff on:
- New accrual calculations (hourly vs. current daily/weekly)
- LCP calculation and reporting
- Hourly leave balance management
- 160-hour sick leave cap monitoring
- Alternative holiday accrual (hourly vs. daily)
Action: Schedule training before implementation date. Create reference guides for payroll calculations.
4. Communicate Changes to Employees
Required: Inform employees about:
- Accrual changes (day one vs. qualifying periods)
- Leave recording in hours
- New sick leave cap
- LCP for casual/additional hours
Action: Prepare communication materials (emails, handbook updates, FAQs) before the transition.
5. Conduct Transition Payroll Audits
Required: Verify that:
- Existing leave balances convert correctly to hours
- Accrual calculations match new hourly rates
- LCP is calculated correctly on additional/casual hours
- Sick leave cap is applied properly
Action: Run parallel payroll testing during transition. Audit first few pay periods after implementation.
leave emails? Track your employee's leave with Leave Balance
Common Transition Mistakes
1. Continuing Day/Week Recording After Implementation
The new law requires hourly recording. Continuing to record leave in days or weeks breaches the legislation and creates calculation errors.
2. Not Applying the 160-Hour Sick Leave Cap
Sick leave stops accruing at 160 hours. Allowing accrual beyond this cap breaches the new law.
3. Incorrect LCP Calculation
LCP is 12.5% of additional/casual hours. Applying the old 8% rate or calculating LCP incorrectly creates underpayment.
4. Failing to Provide Itemised Pay Statements
Pay statements must show hours worked, leave taken, balances, and LCP amounts. Non-compliant statements breach the new requirements.
5. Ignoring Part-Day Leave Entitlements
The new law explicitly permits part-day leave for bereavement, family violence, and other leave types. Forcing full-day only arrangements breaches employee entitlements.
Impact on Different Employment Types
Full-Time Employees
- Annual leave: 4 weeks (160 hours for 40-hour week), accruing hourly from day one
- Sick leave: 10 days (80 hours for 40-hour week), capped at 160 hours
- Other leave: Available from day one
Part-Time Employees
- Annual leave: 4 weeks pro-rata, accruing hourly from day one based on hours worked
- Sick leave: 10 days pro-rata, capped at 160 hours
- Accrual: Calculated on actual hours worked
Casual Employees
- Annual leave: 4 weeks pro-rata, accruing hourly from day one based on hours worked
- Sick leave: 10 days pro-rata, capped at 160 hours
- LCP: 12.5% on all casual hours (automatic, no agreement required)
- Note: Casual loading (25%) continues to apply separately from LCP
How Leave Balance Supports the Transition
System Upgrades
Leave Balance is updating its New Zealand leave management features to support:
- Hourly leave accrual and recording
- 0.0769 hours/hour annual leave accrual rate
- 0.0385 hours/hour sick leave accrual rate
- 160-hour sick leave cap enforcement
- LCP calculation on additional/casual hours
- Itemised pay statement generation
- Part-day leave taking
Transition Support
Leave Balance will provide:
- Data migration tools to convert existing day/week balances to hours
- Transition guides for New Zealand employers
- HR and payroll team training resources
- Support for Employment Bill 2026 compliance requirements
FAQ: Employment Leave Bill 2026
When does the new law take effect?
The Employment Leave Bill 2026 will take effect 24 months after Royal Assent. The exact date is TBD as of April 2026 while the Bill is in committee.
What happens to existing leave balances when the law changes?
Existing leave balances recorded in days/weeks will be converted to hours under a conversion method specified in the implementation regulations. Employers must ensure this conversion is accurate.
Do I need to back-pay leave accrued before the law changed?
No. The new law applies prospectively from the implementation date. You do not need to calculate back-pay for leave that accrued under the old law before the transition.
What if I can’t upgrade my payroll system in time?
You must comply with the new law from the implementation date. If your system cannot support hourly accrual or LCP calculation, you must either upgrade to a compliant system or perform manual calculations. Non-compliance can result in Employment Relations Authority penalties.
Does the 160-hour sick leave cap apply to all employees?
Yes, the cap applies to all employees regardless of whether they are full-time, part-time, or casual. Once an employee reaches 160 hours of accrued sick leave, accrual stops until they use sick leave and fall below the cap.
Is LCP replacing the 8% holiday pay option entirely?
Yes. The 12.5% LCP replaces the 8% holiday pay option. LCP applies automatically to all additional and casual hours — no employee agreement is required.
What if my employment agreement currently specifies better terms than the new law?
Employment agreements can provide MORE than the new legislation, but never less. If your agreement provides more generous leave than the new minimums, you must honour those more generous terms.
Does the state schooling sector really get 10 years to transition?
Yes, the Bill specifies a 10-year transition period for the state schooling sector. All other employers have 24 months. This extended timeframe recognises the complexity of transitioning school-based payroll systems.
Where can I get official updates on the Bill progress?
Monitor Employment New Zealand’s website and subscribe to their updates. The Parliamentary website also tracks Bill progress through the committee and reading stages.
Next Steps
Now that you understand the Employment Leave Bill 2026 changes, you may want to explore related topics:
- The Holidays Act in New Zealand: What Every Employer Must Know in 2026 — current Holidays Act coverage
- Annual Leave in New Zealand: Entitlements, Calculation, and Common Questions — annual leave rules under current law
- Calculating Leave Pay in New Zealand: OWP vs AWE Explained — leave pay calculation methods
leave emails? Track your employee's leave with Leave Balance