Holidays Act reform: Employment Leave Bill

The Select Committee has reported back to the House

The Government is aware that the Holidays Act 2003 has presented ongoing challenges for workers, employers and payroll providers. To address these issues, it is advancing new employment leave legislation designed to be simpler and clearer.

In March 2026 the Employment Leave Bill was introduced, passed its first reading, and was referred to the Education and Workforce Committee. This followed Cabinet’s policy decisions for a new leave framework in August 2025.

The Select Committee considered the public submissions it received on the Bill and reported back to the House of Representatives on 13 July 2026. The Select Committee has proposed some amendments which are set out in its report. The amendments are intended to improve workability, better reflect policy intent, and address issues raised through the select committee process.

Read the Select Committee’s report and the Bill with recommended changes:

Employment Leave Bill(external link) — New Zealand Legislation

The proposed employment leave framework

The Employment Leave Bill proposes substantial changes to the way leave entitlements are earned, taken, and paid:

• How leave is earned - annual and sick leave will accrue from day 1 in hours, against standard hours, rather than being provided as annual entitlements. There will be a 12.5% upfront leave compensation payment in lieu of annual and sick leave accrual for all additional and casual hours. Public holiday entitlements will be based on a new clearer Otherwise Working Day test. Alternative holidays will also shift to hours-based accrual.
• How leave is taken - an employee will use 1 hour of accrued leave for every hour they take off work and will be able to take part days off work.
• How leave is paid – the same hourly leave pay rate (based on an employee’s lowest hourly rate for the day leave is taken) will be used for all types of leave. Fixed allowances will also continue to be paid in full during leave. When annual leave is taken after parental leave it will be paid like any other annual leave.

The proposed new framework for accruing and paying leave is based on a distinction between different types of hours of work:

• Standard hours - hours an employee is required to work under their employment agreement (excluding any hours under an availability provision) and that an employer must pay them for.
• Additional hours - hours an employee works on top of their standard hours if the employer must make an additional payment for the hours.
• Casual hours - hours worked by an employee whose employment agreement does not require their employer to offer work or them to accept any work offered.

More detail about the changes proposed in the Employment Leave Bill (as introduced) can be found in these documents:

• A snapshot of the key changes (updated 11 March):

• A detailed summary of the key changes (updated 11 March):

• Answers to frequently asked technical questions
  (this version was uploaded on 19 March):

Cabinet decisions for the Employment Leave Bill

Cabinet papers and minutes:

Read the Minister’s announcements:

Long awaited Holidays Act replacement passes first reading(external link) — Beehive.govt.nz

Overhaul of broken Holidays Act on the way(external link) — Beehive.govt.nz

Next steps

The Bill will now move to the remaining Parliamentary stages.

Read about the Parliamentary stages:

How a bill becomes law(external link) — New Zealand Parliament 

Check the progress of the Bill:

Employment Leave Bill(external link) — New Zealand Parliament 

Preparing for the changes

While employers may want to start thinking about what the changes will mean for them, it is important to note that the existing Holidays Act remains in force.

There will be a 24-month implementation period between when the Bill receives Royal assent and when it comes into force. This provides time for payroll providers and employers to make changes to business and payroll systems.

In due course, MBIE will update the Employment New Zealand website with guidance to help transition over to the new rules.

Employment New Zealand(external link)

Until the new law comes into force, employers must follow the current rules in the Holidays Act.

Leave entitlements under the current Holidays Act(external link) — Employment New Zealand

If you cannot find the information you need about the existing rules, you contact Employment New Zealand.

Contact us(external link) — Employment New Zealand

Additionally, employers still have an obligation to remediate employees for historical underpayments that have occurred due to non-compliance with the current Holidays Act. 

Addressing Holidays Act non-compliance(external link) — Employment New Zealand

Work completed since 2023

Record of work completed since the 2023 General Election.

Targeted consultation on a draft Bill

The Government undertook targeted consultation in September 2024 on a draft Bill with proposed reforms to the Holidays Act. The draft Bill included some changes and additions to the previous Government’s decisions. The main focus of these was to simplify the calculations and reduce the cost of implementing them for employers. It also reflected the Government’s decision to take a pro-rata approach to sick leave entitlements.

The exposure draft Bill included:

• a proposed approach to pro-rating sick leave so that there is some proportionality to how much an employee works
• moving from a weeks-based entitlement system to a weeks-based accrual system for providing annual leave entitlement
• simpler methodologies for calculating use of leave that do not require pay systems to access data about daily hours of work
• objective criteria for using pay-as-you-go for annual leave and a less burdensome review process, and
• simplifying the payment method for other types of leave so that only 1 calculation is required.

The targeted consultation sought feedback on the technical and policy details of the draft Bill, and on alternative options to improve its simplicity and workability.

Participants in the targeted consultation included stakeholders comprising employers, employees, and technical experts, across various industries, sectors, and population groups. MBIE selected the participants from those who registered interest in participating in June 2024.

Cabinet documents that set out policy decisions in relation to the draft Bill:

Key briefings provided by MBIE to the Minister for Workplace Relations and Safety:

Change in the direction of the reform

In December 2024, officials were directed by the Minister for Workplace Relations and Safety to take a new approach to reforming the Holidays Act, with a focus on simplicity, improving workability and reducing compliance costs. The approach involves designing an hours-based accrual model for annual leave and considering whether other models may be best-suited for more complex work arrangements.

The Minister’s direction followed the completion of targeted consultation on a draft Bill with proposed reforms to the Holidays Act. The targeted consultation sought feedback on the technical and policy details of the draft Bill, and on alternative options to improve its simplicity and workability.

Many participants indicated that the general framework of the draft Bill is not a significant improvement on the current Holidays Act and that more fundamental changes to the leave system would better address the longstanding issues with the Holidays Act. Key reasons given included complexity, compliance costs and workability for those with variable work arrangements.

Read the Minister’s December 2024 announcement:

Minister response to consultation on Holidays Act replacement(external link) — Beehive.govt.nz

Read the Minister’s announcements leading to the targeted consultation:

• June 2024:
  Progress for fixing the Holidays Act 2003(external link) — Beehive.govt.nz
• September 2024:
  Milestone reached for fixing the Holidays Act 2003(external link) — Beehive.govt.nz

Cabinet documents noting the proposed change to the direction of the Holidays Act Reform:

Previous work

Record of the work completed by the previous Government before the 2023 General Election.

The purpose of the Holidays Act Review

The Government established the Holidays Act Taskforce to suggest improvements to the Holidays Act, following a joint request from unions and employers.

The Taskforce was asked to make recommendations on options for a clear and transparent set of rules for providing entitlements to, and payment for, holidays and leave.

The Taskforce’s objectives were to:

• recommend changes that address the high degree of ambiguity that has made the Holidays Act difficult to understand and implement for employers
• make it easier for employees to understand their entitlements.

The Taskforce’s recommendations

The Holidays Act Taskforce made 22 recommendations which were jointly agreed to by union and business representatives. The Government accepted the Taskforce’s recommendations.

The recommendations were intended to provide prescriptive methods that employers could use to accurately calculate and pay leave entitlements. They also included some changes to employees’ leave entitlements and some proposals to provide  greater transparency and ensure employees are fully informed about their leave entitlements.

The recommendations included:

Clear methods, formulas and tests

• New methods for calculating the amount of leave entitlement an employee uses when they take leave.
• New leave payment formulas and definitions to provide greater clarity about what payments must be included in the calculations.
• New eligibility tests for Family Violence, Bereavement and Sick leave.
• A new ‘Otherwise Working Day’ test for determining days on which these entitlements apply. 
• A new test for when an employee may receive their annual holiday entitlement on a ‘pay-as-you-go’ basis and clear rules for reviewing its use.

Increased access to some leave entitlements

• Access to bereavement leave, family violence leave and some sick leave from the first day of employment for eligible employees and after 3 months for others who meet an eligibility test.
• Ability for employees to take annual holidays in advance on a pro-rata basis.
• Entitlement to 3 days bereavement leave for more types of family members.
• For employees returning from parental leave, payment for annual holidays according to the normal rules, rather than holiday pay only being based on average weekly earnings over the last 52 weeks.

Greater transparency for employees

• New, clearer requirements related to the process for having a closedown period. 
• Additional record-keeping requirements to ensure employers have the data required to accurately complete the calculations and tests. 
• A requirement to provide a pay statement in each pay period to provide greater transparency about leave and pay for employees.

Work progressed to implement the Taskforce’s recommendations

Detailed policy design work was completed

MBIE completed a policy design process to develop the details required to implement the Holidays Act Taskforce’s recommendations in legislation.

To support this process, MBIE brought together a working group of stakeholders including payroll system providers, payroll practitioners working in employer organisations, business, and unions.

The group contributed their insights into the practicalities of implementing the recommendations in payroll systems, and across a variety of complex employment environments.

Those insights informed some refinements to the Taskforce’s recommendations to address areas where the group identified gaps and opportunities for simplification.

The objectives of the refinements were to help ensure the new rules and processes for calculating leave entitlements and payments are definitive, clear, and logical, can be systematised, and are workable in all employment situations.

All of those refinements were consistent with the intent of the Taskforce’s recommendations.

Drafting of a Bill began

Drafting of legislation to implement the Taskforce recommendations and refinements began before the 2023 General Election but a Bill was not introduced.

The Government considered it was important that time was taken to get it right first time in order to minimise the risk of implementation challenges and future compliance issues.

Background documents

Establishing the Taskforce

(The Minister for Workplace Relations and Safety made a minor amendment to paragraph 9 of the terms of reference.)

Holidays Act: Issues paper

In August 2018, the Taskforce published an issues paper that set out its understanding of the key issues that employers, employees, and payroll providers face in trying to implement the Holidays Act 2003. The Taskforce considered feedback from stakeholders on the issues paper as it developed its final recommendations.

Interim report from Holidays Act Taskforce

In December 2018 the Taskforce provided an interim report to the Minister for Workplace Relations and Safety on progress with the review of the Holidays Act.

Accepting the Taskforce’s recommendations