Legislation for sweeping changes to New Zealand's employment leave system has been voted in, replacing the Holidays Act with hours-based leave that workers will begin earning from their first day on the job.
The new legislation overhauls how annual leave, sick leave and public holiday entitlements are earned, taken and paid.
But workers and employers will not feel the changes immediately.
A 24-month implementation period will run before the new system comes into force, giving payroll providers and employers time to update their systems.
Until then, all existing Holidays Act rules continue to apply.
The old leave laws have long been criticised for being complex and difficult to apply, particularly for workers with variable hours, such as the tourism, hospitality and health sectors where non-traditional work patterns were common.
Employers sometimes miscalculate entitlements, leading to widespread non-compliance and billions in remediation payments across both public and private sectors.
As of August 2025, Health NZ Te Whatu Ora had paid out more than $544 million in remediation payments to 72,296 current employees. For the health sector alone, the total financial liability was estimated to be more than $2 billion.
What's changing
The Employment Leave Bill, led by the ACT Party as part of the Coalition Government, passed the final hurdle in Parliament last night. It replaces the Holidays Act 2003.
Under the current system, workers become entitled to four weeks of annual leave after completing 12 months of continuous employment.
Sick leave kicks in after six months, with a lump entitlement of 10 days per year — regardless of how many days a week the employee works.
Under the new system, both annual and sick leave entitlements would accrue from the first day of employment and be based on the number of hours worked.
Annual leave will accrue in hours from day one, at a minimum rate of 0.0769 hours per hour worked - the equivalent of four weeks a year for someone whose hours don't change. Sick leave will accrue at 0.0385 hours per hour worked, capped at 160 hours.
Part-time workers will earn sick leave in proportion to their hours, rather than receiving the same 10 days a year as full-time staff.
Leave balances will be "banked" in hours, meaning they will no longer shrink or grow when a worker changes their hours.
Workers will be able to take leave in part days, and can request to cash up to 25% of their annual leave balance each year - up from the current one-week maximum.
Casual workers will be paid a leave compensation payment of at least 12.5% for their hours and will not get annual or sick leave. Bereavement and family violence leave will be available to all workers, including casuals.
Labour opposed the legislation change saying those who could least afford it would lose out under the new laws.
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