If you’ve ever felt confused by the Holidays Act 2003, you’re far from alone. After more than two decades of ambiguity and millions of dollars in remediation payments across New Zealand, the Government has introduced the Employment Leave Bill 2026 to replace the Holidays Act entirely. This is the most significant reform to New Zealand’s leave system in over 20 years. Whether you have 3 staff or 30, understanding these changes now gives you a genuine head start.

The Employment Leave Bill was introduced to Parliament on 8 March 2026 and has been referred to the Education and Workforce Committee, which is due to report back by 12 July 2026.

Minister Brooke Van Velden expects the Bill to be passed before the November 2026 election. Once passed, there will be a 24-month implementation period before the new rules take effect, meaning the new Act could be in action around 2028.

The bottom line: The Holidays Act 2003 still applies today. You must continue to comply with the current rules until the new legislation comes into force. But there’s no reason not to start preparing.

The single most significant change in the Employment Leave Bill is the move from a days-and-weeks-based system to an hours-based model. Under the proposed framework:

• Annual leave will accrue at 0.0769 hours per standard hour worked from an employee’s very first day.
• Sick leave will accrue at 0.0385 hours per standard hour worked, capped at 160 hours.
• Leave will be taken in hours, meaning employees can take part-days off work.
• Leave balances will be banked in hours and won’t automatically adjust if an employee’s standard hours change.

This is a practical improvement for small businesses with part-time staff, variable rosters, or casual workers.

The Bill distinguishes between three categories of hours that affect how leave is earned:

1. Standard hours The hours required under the employment agreement. These drive leave accrual.
2. Additional hours Extra hours the employer doesn’t have to offer and the employee can decline.
3. Casual hours Genuinely casual work where neither party is obligated.

Why this matters: Clearly defining standard hours in your employment agreements becomes critical under the new framework.

Instead of accruing leave on additional or casual hours, employees will receive a 12.5% loading paid at the time those hours are worked. This replaces the current 8% holiday pay model and covers both annual and sick leave in a single, simpler payment.

• Bereavement and family violence leave available from day one (currently after 6 months).
• A single hourly rate for all leave pay calculations, excluding bonuses and commissions.
• New “Otherwise Working Day” test for public holidays: if an employee worked 50% or more of the same weekday in the preceding 13 weeks, it’s treated as an otherwise working day.
• Alternative leave for working public holidays accrues hour-for-hour.
• Employees can cash up 25% of annual leave each 12-month period.
• A remediation framework for resolving historical Holidays Act underpayments.

• Audit your employment agreements to ensure standard hours are clearly defined.
• Talk to your payroll provider about hours-based leave accrual and LCP calculations.
• Review your leave policies and think about how an hours-based model changes your processes.
• Document work patterns for staff on rosters or variable hours.
• Stay informed as the Bill may change through Parliament. We’ll keep you updated.

The Employment Leave Bill 2026 is a genuine opportunity for NZ small businesses to reset how they manage leave, with clearer rules and less room for costly mistakes. At Drive Culture, we’re committed to helping you make sense of these changes without the jargon or overwhelm. As the Bill progresses, we’ll continue to share practical updates so you can focus on what matters most: growing your business and looking after your people.