What is the Employment Leave Act and when does it start?
The Employment Leave Act 2026 replaces the Holidays Act 2003 on 6 August 2028, after Royal Assent on 6 August 2026. Annual and sick leave will accrue by the hour from day one, and casual and additional hours earn a 12.5% payment instead. Until 2028 the Holidays Act still applies, and past underpayments must still be fixed.
This guide is for New Zealand owners and managers who run payroll or sign employment agreements, and for anyone with offshore staff who wonders if the Act reaches them. It is general information, not legal advice. We read MBIE's guidance and law-firm commentary rather than the Act itself, because the legislation website would not load for us, so check any detail you rely on against the Act. Table 1 sets out the dates.
Table 1: Key dates for the Employment Leave Act 2026
| Date | What happens | What it means for you |
|---|
| 13 Jul 2026 | Select committee reports on the Bill | The Bill returns to Parliament for its final stages |
| 6 Aug 2026 | Royal Assent | The Act is law, but nothing changes for payroll yet |
| 7 Aug 2026 | Regulation-making for the Holidays Act remediation process and pre-commencement consultation can begin | Government can start designing the clean-up process for past underpayments |
| 1 Jul 2027 | A few parental leave amendments start | Mainly consequential changes to parental leave law; ask your payroll provider if they affect you |
| 6 Aug 2028 | The Act commences and replaces the Holidays Act 2003 | New accrual, leave pay and record rules apply from each employee's first pay period starting on or after this date |
| 6 Aug 2029 | End of the year for agreements to align | More favourable existing terms continue to apply until then |
Sources: MBIE, Holidays Act reform page, Employment Leave Act explainer (version 4, 6 Aug 2026) and technical FAQ (7 Sep 2026); Employment New Zealand (7 Aug 2026); Employment Leave Bill as introduced, via legislation.govt.nz (summary of the commencement clause); Sprintlaw. The Act's own text was not read. Holland Beckett (Oct 2026) lists further 1 July 2027 provisions, which the MBIE pages do not mention. General information, not legal advice.
MBIE is clear that employers cannot start following the new Act early, even if they are ready, so the next two years are a preparation window and not a switch-over. The sources disagree on small points. One law firm gives Royal Assent as 5 August where MBIE says 6 August, and the commentary differs on what starts on 1 July 2027. We have followed MBIE. For most employers 6 August 2028 is the date that matters, and the new rules apply from each employee's first pay period starting on or after it.
What changes for employers?
Leave moves from weeks and days to hours, which changes how you accrue, pay and record it. Table 2 compares today's rules with the new ones.
Table 2: Holidays Act 2003 compared with the Employment Leave Act, from 6 August 2028
| Topic | Holidays Act 2003 (today) | Employment Leave Act (from 2028) |
|---|
| Annual leave | Four weeks, after 12 months of employment | Accrues from day one at not less than 0.0769 hours per standard hour worked |
| Sick leave | 10 days a year after six months, with a balance of up to 20 days | Accrues from day one at not less than 0.0385 hours per standard hour worked, capped at 160 hours |
| Bereavement and family violence leave | Qualifying period before entitlement | Available from day one to all employees, including casuals, in days and part days |
| Casual and additional hours | 8% pay-as-you-go holiday pay | 12.5% leave compensation payment, shown separately in pay records, instead of accruing leave on those hours |
| Cashing up annual leave | Up to one week | Up to 25% of the balance, once per 12-month period, on the employee's request; the employer cannot require it |
| Public holidays and alternative holidays | Decided by whether the day would otherwise have been a working day | An objective test: the employee worked at least half of that weekday over the previous 13 weeks; alternative holidays accrue hour for hour |
| Leave pay | Based on ordinary weekly pay or average weekly earnings | One hourly leave pay rate set by the Act, with fixed allowances paid in full; commentary differs on commission and overtime, so check with your payroll provider |
| Records | Holiday and leave records | Hours worked, accruals, leave taken and balances, kept for six years |
Sources: MBIE explainer (6 Aug 2026) and technical FAQ (7 Sep 2026); Holland Beckett (Oct 2026); Citation Group (12 Aug 2026); Sprintlaw. The 'today' column is standard Holidays Act 2003 background and was not re-checked against the 2003 Act. The 13-week public holiday test is from law-firm commentary. General information, not legal advice.
The arithmetic is simple. A full-time employee on a 40-hour week accrues about 160 hours of annual leave over a year, which is the same four weeks as today, except that it starts on the first day. A 20-hour part-timer accrues about 80 hours, still four of their working weeks. Sick leave comes to about 80 hours a year for a full-timer, with the balance capped at 160 hours. Part-timers may accrue less sick leave than the flat 10 days they get now, as one law firm points out.
The biggest cost change is for casual and variable-hours teams. Hours where neither side is obliged to offer or accept work, and additional hours beyond an employee's standard hours, do not accrue leave. They attract a 12.5% payment instead, up from the 8% pay-as-you-go rate. As an illustration, 100 casual hours at $30 an hour would carry $375 under the new rule against $240 at 8%, though the 8% applies to gross earnings today so your numbers will differ. MBIE also says an employee cannot have standard hours and casual hours in the same role, so agreements will need to say which each hour is.
None of this clears the Holidays Act backlog. MBIE says employers still have an obligation to remediate employees for historical underpayments, and the Act provides for a statutory process to be set by regulations. Repealing the old Act in 2028 does not wipe past underpayments.
Does the Employment Leave Act apply to offshore staff?
Probably not for staff employed by a Philippine or South African entity under local law, but no source we read says so, so treat it as a question for your lawyer. The Bill as introduced applied to all employers and employees and defined employee by reference to section 6 of the Employment Relations Act 2000. We read that through a summary of the Bill, not the enacted text, and the final Act may differ. None of the MBIE pages or the commentary we read says whether the Act reaches work done outside New Zealand, overseas employers or contractors.
Our reading, which is not legal advice, is that offshore staff employed by a local entity under Philippine or South African law are covered by that country's leave rules, such as the Philippine 13th month and holiday pay, and not by this Act. The real overlap is classification. If you engage someone offshore as a contractor, whether they are one turns on the real nature of the relationship, including the five-part gateway test that has applied since 21 February 2026. Table 3 sets out the common scenarios.
Table 3: How the Employment Leave Act may relate to offshore staff: scenarios and our reading
| Situation | How we read it | What to do |
|---|
| Employee working in New Zealand for a New Zealand business | The Act applies from 2028 | Plan payroll and agreement changes now |
| Offshore staff employed by a Philippine or South African entity under local law | No source we read addresses it; our reading is that local employment law and the local employer apply, not this Act | Ask who the legal employer is and under whose law, and get it in writing |
| Offshore person engaged as an independent contractor | Whether they are one turns on the real nature of the relationship, including the five-part gateway test in force since 21 Feb 2026; no source says what leave rules follow if someone is found to be an employee while living overseas | Have an NZ employment lawyer review the contractor agreement and how the work is done |
| Offshore person employed directly by a New Zealand business | The Bill as introduced covered all employers and employees and no source addresses territorial scope, so this is unsettled | Get written NZ legal advice before relying on either answer |
Sources: Employment Leave Bill as introduced, summary of clauses 4 and 5 via legislation.govt.nz (the enacted text was not read); MBIE explainer (6 Aug 2026); Holland Beckett (Oct 2026) on the Employment Relations Amendment Act 2026 gateway test. None of the sources discuss territorial application. This is our reading, not legal advice.
None of this changes who employs your offshore team. Ask any provider which entity employs the worker, under whose law, and keep the answer in writing. Ask us the same. Our contractor agreements and compliance models guides cover the structures, and if you need certainty on the Act itself, ask a New Zealand employment lawyer to put it in writing.
What should New Zealand employers do before August 2028?
Start with the past, because remediation is owed now. If you have not audited your Holidays Act calculations, do it, and do not assume a new system fixes old errors. Then ask your payroll provider for its roadmap and test dates, since the 12.5% payment and leave accruals must appear as separate components of pay.
Next, review your agreements. Decide which of your hours are standard, additional or casual, and note that agreements have until 6 August 2029 to align, with more favourable existing terms continuing until then. Budget for the step from 8% to 12.5% if you use casuals. For offshore staff, write down who the legal employer is and under which country's law, and keep local leave separate from your New Zealand payroll. Do not switch early, and re-check when MBIE publishes its detailed guidance, which it said would follow in the coming months.
The bottom line for New Zealand employers
The Employment Leave Act is a payroll and agreements project with a two-year runway, not an emergency, but your Holidays Act duties, including remediation, apply today. Pear Tree, with offices in Sydney, Auckland, Hawke's Bay, Cebu, Manila and Cape Town, has placed talent with 750+ Australian and New Zealand businesses, but we are not employment lawyers, so get written advice on the offshore question and ask every provider who the legal employer is.
About the author
Nick, Co-Founder of Pear Tree, leads sales, partnerships and business development. Pear Tree connects Australian and New Zealand businesses directly with vetted offshore professionals from the Philippines and South Africa, with no agency middleman.
Frequently asked questions
When does the Employment Leave Act start?
The Act received Royal Assent on 6 August 2026 and replaces the Holidays Act 2003 on 6 August 2028, applying from each employee's first pay period starting on or after that date. A few parental leave amendments start on 1 July 2027, according to the Bill and law-firm summaries. Until 2028 the Holidays Act applies, and employers cannot start following the new Act early.
How much leave will employees accrue under the new Act?
Annual leave accrues at not less than 0.0769 hours per standard hour worked and sick leave at not less than 0.0385 hours per standard hour, from the first day of employment, with sick leave capped at 160 hours. For a 40-hour week that is about 160 hours of annual leave and 80 hours of sick leave a year. Additional and casual hours attract a 12.5% payment instead.
Do I still have to fix Holidays Act underpayments?
Yes. MBIE says employers still have an obligation to remediate employees for historical underpayments, and the Act provides for a statutory remediation process to be set by regulations. Repealing the Holidays Act in 2028 does not wipe past underpayments. Ask your payroll provider or adviser about an audit.
What changes for casual and part-time staff?
Casual and additional hours earn a 12.5% leave compensation payment instead of accruing leave, replacing the 8% pay-as-you-go model, and it must be shown as a separate component of pay. Part-timers accrue by the hour, so they may accrue less sick leave than the flat 10 days they get now. Bereavement and family violence leave is available from day one.
Does the Employment Leave Act apply to my offshore team in the Philippines or South Africa?
No source we read says whether the Act reaches work done outside New Zealand. Our reading is that staff employed by an overseas entity under local law are governed by that country's rules, and the real overlap is contractor classification under the Employment Relations Act and its gateway test. Confirm with a New Zealand employment lawyer, and ask any provider which entity employs the worker.
About the author
Nick, Co-Founder of Pear Tree, leads sales, partnerships and business development. Pear Tree connects Australian and New Zealand businesses directly with vetted offshore professionals from the Philippines and South Africa, with no agency middleman.
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