Key Takeaway
The Employment Leave Bill has passed its second reading but is not yet law. Employers must follow the current Holidays Act while preparing for the proposed hours-based leave framework and a 24-month implementation period after Royal assent.
The Employment Leave Bill is before Parliament and would replace the Holidays Act 2003 if enacted. It has passed its second reading, but it is not yet law. Employers must continue to apply the current Holidays Act, provide the correct leave entitlements and payments, and remediate historical underpayments while the Bill completes the remaining parliamentary stages.
Where the Employment Leave Bill stands
The Bill was introduced in March 2026 and referred to the Education and Workforce Committee after its first reading. The committee reported back in July, and Parliament agreed to the second reading on 21 July 2026.
As at 29 July 2026, Parliament’s Bill tracker records the Bill at the committee of the whole House stage. It still needs to complete that stage, pass a third reading and receive Royal assent before becoming an Act.
MBIE says there will be a 24-month implementation period between Royal assent and the new law coming into force. That means employers can prepare for the proposed framework, but should not treat the Bill as the current payroll rule.
What the Bill proposes
The MBIE reform summary says annual and sick leave would accrue from the first day of employment in hours, against an employee’s standard hours, instead of being provided as annual entitlements.
Employees would use one hour of accrued leave for each hour taken and could take part days. Additional and casual hours would generally attract a 12.5% upfront leave-compensation payment instead of annual and sick leave accrual.
The Bill also proposes one hourly leave-pay rate based on the employee’s lowest hourly rate for the day leave is taken, with fixed allowances continuing to be paid in full. Public-holiday entitlement would use a new Otherwise Working Day test.
These are proposals, and the Bill can still change during the remaining stages. Employers should check the enacted legislation and official transition guidance before changing employment agreements, leave balances or payroll calculations.
The current Holidays Act still applies
Under the current law, employees generally become entitled to four weeks of paid annual holidays after 12 months of continuous employment. When an employee takes annual holidays, Employment New Zealand says the payment must be at least the greater of ordinary weekly pay or average weekly earnings.
Ordinary weekly pay can include regular salary or wages, regular allowances, regular productivity or incentive payments, the cash value of board or lodgings, and regular overtime. Average weekly earnings are based on gross earnings over the preceding 12 months. The correct treatment depends on the facts and the statutory definitions.
The proposed replacement does not cancel current liabilities. Employment New Zealand says employers must keep complying with the Holidays Act and pay employees for historical underpayments until new legislation comes into force.
What employers can prepare now
Keep current compliance work separate from future-system planning. Review present Holidays Act calculations and any identified arrears under the existing rules rather than anticipating the Bill.
Map the proposed terms to your workforce data: standard, additional and casual hours; regular and fixed allowances; leave balances; public-holiday work patterns; and parental-leave scenarios. This helps identify where employment agreements, time records or payroll fields may need future work.
Ask your payroll provider how it is tracking the Bill, what testing and migration support it expects to offer, and which data-quality issues employers can address before the implementation period. Do not switch calculations until the new law and commencement dates are confirmed.
Review connected payroll obligations, including KiwiSaver employer contributions, without assuming that a leave-law change alters those separate rules. Employment and payroll specialists can help assess current compliance or interpret the final legislation for a particular workforce.
Sources checked
Employment New Zealand — Employment Leave Bill 2026, dated 12 March 2026, including the warning that the current law still applies.
MBIE — Holidays Act reform: Employment Leave Bill, updated 20 July 2026, including the select-committee status, proposed framework and 24-month implementation period.
New Zealand Parliament — Employment Leave Bill, including the Bill’s parliamentary stages and second-reading date.
Employment New Zealand — Annual holiday pay and Addressing Holidays Act non-compliance, including the current payment calculations and remediation obligations. Sources accessed 29 July 2026.
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