10 Oct 2025
The End of the Holidays Act and the Dawn of the Employment Leave Act
The New Zealand workplace is set for a major shift. Workplace Relations and Safety Minister Brooke van Velden has announced that the long-criticised Holidays Act 2003 will be repealed and replaced with a new Employment Leave Act.
For years, employers and employees alike have struggled with the complexity of the current regime. Payroll errors, unclear entitlements, and costly remediation programmes have been common pain points. Now, the government is promising a system that is simpler, fairer, and easier to administer.
What are the proposed changes under the Employment Leave Act?
The new law aims to strip away complexity and replace it with a streamlined system. Some of the more significant changes include:
- Leave accrual in hours, not days or weeks
Annual and sick leave will accrue from day one, in direct proportion to hours worked. This means more flexibility and clarity for both employers and employees.
- A single pay calculation for leave
Gone are the confusing calculations like OWP v AWP. A single hourly leave pay rate will apply, based on wages and salary (excluding bonuses, commissions, and variable allowances).
- Flexibility to take leave in hours
Employees will be able to take leave in part-day increments, making it easier to match modern working patterns.
- Casual employee entitlements
Casuals will receive a 12.5% loading from day one to cover sick and annual leave, plus access to bereavement and family violence leave.
- Public holiday test simplified
The “otherwise a working day” test will use a 50% rule, if an employee worked (or was on leave) on that day in 7 of the previous 13 weeks, it counts.
- Fairer treatment for parents
The controversial parental leave override will be scrapped, allowing returning parents to take annual leave at full pay within the first 12 months back at work.
- Bereavement and family violence leave from day one
No more six-month stand-down,these entitlements will be immediate.
- Clearer pay statements
Employers will need to provide itemised statements every pay period, showing pay and leave entitlements transparently.
While the move to a simpler system is welcome, change won’t happen overnight. If the Bill is passed, there will be a 24-month transition period to give employers and payroll providers time to update systems. Importantly, there will be no retrospective effect-so current obligations under the Holidays Act remain until the new law is in force.
Di Hallifax | Director & People and Culture Specialist
