Employment Leave Bill Passes Third Reading: What Employers Need to Know
Employment Leave Bill Passes Third Reading: What Employers Need to Know
The Employment Leave Bill has now passed its third reading, bringing New Zealand one step closer to replacing the Holidays Act 2003.
While the new legislation isn't expected to come into force until two years after Royal Assent, it's a good opportunity for employers to start understanding what's changing and what it could mean for their business.
The changes will affect employment agreements, payroll systems and the way leave is managed across many workplaces, so preparing early will make the transition much easier.
The Key Changes
1. Annual and Sick Leave
Annual leave and sick leave will begin accruing in hours from an employee's first day of employment. Annual leave will accrue at a rate of 0.0769 hours for each standard hour worked, while sick leave will accrue at 0.0385 hours for each standard hour worked. Leave entitlements will accrue at the same rate for both full-time and part-time employees based on their agreed standard hours.
Bereavement leave and family violence leave will also be available from day one, making leave entitlements more accessible from the start of employment.
2. Standard, Additional and Casual Hours
One of the biggest changes is the introduction of three categories of working hours:
Standard hours
Additional hours
Casual hours
These categories will determine how leave is accrued and paid, making it more important than ever that employment agreements clearly define an employee's working arrangements.
3. Casual and Additional Hours
One of the key changes under the new legislation relates to employees working casual or additional hours.
Under the current Holidays Act, genuine casual employees are generally paid 8% holiday pay instead of accruing annual leave. Under the new framework, additional and casual hours will instead attract a 12.5% Leave Compensation Payment.
For businesses with regular overtime, shift workers, or casual employees, this is likely to be one of the biggest practical changes.
4. Public Holidays
The Bill introduces a revised "Otherwise Working Day" test, providing greater certainty for employees with irregular or variable work patterns.
5. Cashing Up Annual Leave
Employees will be able to request to cash up to 25% of their annual leave balance each year. Employers can decline the request but must respond in writing within 14 days.
6. Other Changes
The legislation also introduces:
A single leave payment calculation to simplify payroll.
Greater flexibility where employees hold multiple roles with the same employer.
An optional process for resolving historical Holidays Act underpayments.
Some parental leave changes taking effect from 1 July 2027.
What This Means
For Employees
The new framework aims to:
Provide earlier access to leave entitlements.
Better reflect part-time, flexible and variable working arrangements.
Make leave calculations simpler and more consistent.
For Employers
Most employers will need to review:
Employment agreements.
Payroll systems.
Hours of work and overtime arrangements.
Casual and flexible working arrangements.
Time recording processes.
Businesses with employees who regularly work overtime, operate shift-based workplaces, or have casual or variable-hour workforces are likely to be the most affected.
What You Can Do Now
Although employers have at least two years before the legislation comes into force, it's worth starting preparations now.
We recommend:
Reviewing employment agreements to ensure standard hours are clearly defined.
Identifying employees who regularly work overtime or have flexible, part-time or casual working arrangements.
Checking payroll systems can support the new leave framework.
Reviewing time recording processes.
Planning ahead for the new Leave Compensation Payment.
Keeping an eye on further MBIE guidance as implementation approaches.
Need a Hand?
While there's no immediate rush, preparing early will make the transition much smoother and help avoid a last-minute scramble.
If you'd like help reviewing your employment agreements, workplace policies or payroll processes ahead of the new legislation, get in touch with the team at People Passion.
We're here to make it simple.