New Zealand’s Employment Leave Act: What Changes for a Trade Employer, and When

From 6 August 2028, your apprentice’s overtime stops feeding into holiday pay. Under New Zealand’s Employment Leave Act you pay its leave value as 12.5%, on the same payslip. The standard hours you write down now decide which hours qualify.

Until then, nothing changes on your crew’s payslips. The Employment Leave Act 2026 replaces the Holidays Act on 6 August 2028, and for each worker it starts with their first pay period beginning on or after that date. It’s an Act of Parliament, administered by the Ministry of Business, Innovation and Employment (MBIE). Employment New Zealand, MBIE’s employment standards website, is blunt about timing: “You cannot start following the new law early, even if you are ready.” This year’s Christmas closedown and the summer public holidays run under the Holidays Act 2003 in full, the same rules our Labour Day pay guide walks through.

One apprentice’s overtime week, now and in 2028

Take a second-year apprentice sparky on $25 an hour, with 40 standard hours a week in their agreement. This week they also work 6 hours of overtime at time and a half, and the overtime meets the Act’s “additional hours” test. The figures are illustrative.

What moves on the payslip, and what doesn’t

The annual leave earned that week is worth about $76.90 at $25 an hour, close to the 4/52 of the week’s standard pay you’d expect. For a steady 40-hour worker, the value of leave on standard hours barely moves.

What moves is the overtime. Today it counts in gross earnings and can raise holiday pay later, through the “greater of” test in section 21 of the Holidays Act. Under the Employment Leave Act, nothing builds up on additional or casual hours. Instead you pay a leave compensation payment of at least 12.5% in the same pay period, on top of wages (s124–126).

Payroll has to get the base right. The 12.5% is worked out on the worker’s ordinary hourly rate, which the Act defines as the lowest hourly rate in their agreement, not the overtime rate. The easy mistake is taking 12.5% of $37.50, or of the whole $225 of overtime pay. Either way you’d pay $28.13 instead of $18.75. Get it wrong in the other direction, and the Act gives the worker or a Labour Inspector a route to make you correct it (s146–147).

How the Employment Leave Act sorts every hour

The Act received royal assent on 6 August 2026. It sets the minimum leave every employer must give: annual leave, public holidays, sick, bereavement and family violence leave, and the new leave compensation payment. Its entitlements are legal minimums, not options. The system runs on hours rather than weeks, and every hour a person works falls into one of three kinds.

• Standard hours are the hours you can require someone to work and must pay them for, whether or not you need them that week. From 2028 they must be written in the employment agreement, a roster or an agreed “notional roster” (s6).
• Additional hours are extra hours beyond those that you don’t have to offer, the worker can refuse, and you pay extra for. Hours worked under an availability provision count too (s7).
• Casual hours are hours where you don’t have to offer work and the worker doesn’t have to accept it (s8).

On standard hours, annual leave builds up from day one at 0.0769 of an hour for every hour worked, and sick leave at 0.0385 of an hour, up to a 160-hour cap (s24, s73, s75). Staff can take leave in part days. Every type of leave is paid at one rate: the lowest hourly rate in their agreement for that shift, plus any fixed allowances (s118–119).

Why writing the hours down matters now

The apprentice’s week worked cleanly because of two facts: 40 standard hours in writing, and overtime that is genuinely optional and paid extra. Suppose an agreement says “40 hours plus reasonable overtime as required”. Overtime the worker can’t refuse, and that isn’t under an availability provision, may not fit neatly into either box. The Act doesn’t spell out what happens then. Employment New Zealand’s guidance on hours, rosters and availability provisions is due between November 2026 and January 2027.

The same goes for anyone whose days or hours shift week to week. From 2028, if their standard hours can’t be worked out from the agreement, you and the worker must agree a notional roster in writing (s10). That’s a conversation to have calmly over the next year, not in the week before the switch.

Your leave balances going into the Employment Leave Act

On 6 August 2028, each standard-hours worker’s existing annual holidays convert into hours, using their ordinary weekly hours. Casual staff have their existing holiday pay paid out on the day. Whatever balances you carry into that conversion come with you. Employment New Zealand’s warning is simple: “If your data is wrong, any errors will carry over and be harder to fix later.” MBIE adds that employers still have to put right historical underpayments under the Holidays Act.

Employment Leave Act dates to plan around

• Now to January 2027: employer guidance from Employment New Zealand, including agreements, leave conversion and rosters. Its timeline says these dates are indicative.
• February to July 2027: planning tools and checklists, and time to review payroll and leave data.
• August 2027 to July 2028: update agreements and policies, by agreement with your staff, and test payroll.
• 6 August 2028: the Act takes effect from each worker’s first pay period on or after this date, and the Holidays Act is repealed.
• 6 August 2029: agreements must comply. Until then both the agreement and the Act apply, and the better term for the worker wins, so using the extra year makes payroll harder rather than easier.

What to do before the summer break

Employment New Zealand says there’s nothing you have to do yet. These jobs make 2028 easier, drawn from its guidance for employers and from the Act:

1. Keep following the Holidays Act, including for this year’s closedown.
2. Check each person’s leave balance and how you’ve been calculating holiday pay, and fix anything that’s wrong.
3. Ask your payroll provider whether its software will handle the leave compensation payment and hours-based leave.
4. Read every agreement for written standard hours, and for how overtime and on-call work are described.
5. Note who has irregular hours and will need a notional roster in 2028.

Any change to an agreement has to be discussed and agreed with the worker first, with a record kept. While you’re reviewing payroll, our piece on KiwiSaver employer contributions covers the other change on this year’s payslips.