Big changes are coming to how New Zealanders earn and take sick leave and annual leave. The Government intends to repeal the Holidays Act and replace it with a new Employment Leave Act designed to make the system fairer and easier to understand.

The idea is simple: leave should reflect the way people actually work today. Whether you’re full-time, part-time, or casual, your entitlements will soon look a little different. You can read the official announcement here.

The Biggest Changes at a Glance

Here’s what’s on the way:

  • Leave earned from day one, in hours. Annual and sick leave would accrue as hours from the first day of employment.
  • Use part-days. Employees could take leave in hours, not just days or weeks.
  • Cash-ups. Employees could request to cash up 25% of their total annual leave balance each year (by agreement).
  • Casuals & extra hours. A 12.5% leave compensation payment (LCP) would apply to casual hours and hours worked above contracted hours (with some exceptions for certain salaried roles).
  • Bereavement & family violence leave from day one. Still days-based, but usable in part-days.
  • Public holidays simplified. Alternative leave would accrue hour-for-hour; “otherwise working day” (OWD) gets a clearer test.
  • Single pay method for leave. One hourly leave pay rate based on base wages for the day of leave.
  • Parental leave fix. Annual leave after returning from parental leave would be paid at the normal rate (no reduction).
  • Pay statements. Employers would need to issue itemised pay and leave statements every pay period.

What This Means for Employees

These changes should make life easier and fairer:

  • More flexibility – Taking time off for a few hours rather than a full day becomes simple.

  • No more waiting – Your entitlements start building from day one.

  • Better for casuals – A higher leave pay-out rate recognises the value of your time.

  • Parents protected – Returning from parental leave won’t hurt your future leave entitlements.

One watch-out: part-time workers may see fewer sick days overall, as leave will scale with hours worked instead of defaulting to a flat 10 days.

What This Means for Employers

For businesses, the biggest shift will be practical:

  • Fewer grey areas. Hours-based accrual and part-day use reduce questions about “what’s a week” and fit better for variable patterns.
  • Cleaner public holidays. Hour-for-hour alternative leave is fairer (no more full day for a two-hour shift).
  • Visible casual/extra hours cost. Budget for 12.5% LCP on eligible hours.
  • Parents protected. Expect normal-rate annual leave after parental leave (forecast the uplift).
  • Less admin whiplash. One pay method for leave + mandatory pay statements = fewer payroll headaches. 

The upside? The rules should be clearer and less prone to errors, saving time and compliance headaches long term.

Key Considerations for Employers

  • Future-proof your employment agreements: avoid hard-coding today’s OWD ules or day-based requirements.
  • Check payroll functionality: engage with your payroll provider to ensure they are across the proposed changes and have the functionality to address them.
  • Model the cost impact: Talk to us about modelling the potential cost impacts of the proposed changes on employee remuneration. 
  • Stay informed: Assign someone in your business (probably yourself if you’re reading this!) to keep and eye on the changes and the dates. 
  • Keep complying with the current Act. Until the new law comes into effect, there’s no pause on existing obligations to stay compliant.

FAQs: Sick Leave & Annual Leave Entitlements in NZ

1. Do part-time workers get less sick leave under the new law?
Yes. Sick leave will scale with hours worked, so part-time staff will accrue less than full-timers.

2. How will annual leave be calculated in New Zealand?
Annual leave will accrue at 0.0769 hours per hour worked, making it fairer and easier to track.

3. What’s changing for casual workers?
Casuals won’t accrue leave but will receive a higher “in lieu” payment of 12.5% of their earnings.

4. When will the Employment Leave Act come into effect?
The law will come with a 24-month transition period, giving employers time to update systems and contracts.

Final Thoughts

The overhaul of sick leave and annual leave entitlements is one of the biggest workplace law changes in years. It’s designed to simplify, modernise, and better reflect the reality of today’s workforce.

For employees, it means more flexibility and fairer treatment. For employers, it means updating systems now to avoid a scramble later.

Change is coming — and with a two-year transition period, there’s time to prepare.

How Traktion Can Help

  • Employment agreement & policy refresh (plain-English, future-proofed)
  • Payroll readiness check and vendor liaison
  • Cost modelling and leave-liability provisioning
  • Mini-audit & remediation continuity
  • Board-ready briefings (changes, timelines, risks, numbers)

 

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