On September 23, 2025, the New Zealand Government announced its plan to repeal and replace the Holidays Act 2003 with a new piece of legislation. This marks a significant step towards simplifying leave entitlements and payment processes for both employers and employees.
However, here’s the most important takeaway for now: nothing is changing just yet.
What’s Happening?
At this stage, the Government has only confirmed cabinet approval of the proposed policy direction. The next steps include:
- Drafting and introducing a Bill into Parliament.
- Parliamentary processes such as the first reading, select committee review, and second and third readings.
- Receiving Royal Assent before the new Act becomes law.
Once the Bill is passed, the Government has confirmed there will be a 24-month implementation period to allow employers, payroll providers, and businesses to update systems and prepare for the changes.
Considering the time involved for parliamentary approvals and the implementation window, it could be at least two and a half years before this impacts your payroll systems or employment practices.
Likely Changes You Can Expect
While we’re still waiting for specifics, the proposed policy direction suggests several key changes:
- Leave Accrual in Hours, Not Days or Weeks - Annual and sick leave will accrue in hours from day one of employment, making entitlements proportional to hours worked. They will be paid using the same calculation method.
- Higher Compensation for Casual and Extra Hours - Casual employees and those working beyond contracted hours would receive enhanced pay rather than accruing leave or being paid more for taking time off.
- Flexibility for Taking Part-Days Off - Employees will have more options for taking partial days of leave, improving flexibility.
- Public Holidays and Alternative Days - New criteria for determining “Otherwise Working Day” classifications, with alternative holidays accruing based on hours worked.
- Bereavement & Family Violence Leave – are set to remain in days but be available from day one.
With the Bill still in drafting stages, there’s no need to make changes just yet. You’ll have plenty of time to prepare once it becomes law.
You can use this lead time wisely to budget and plan for the eventual system updates and any necessary staff training.
We’ll continue to monitor the progress of the Holidays Act changes and keep you updated on key developments along the way.