Blog

The Employment Leave Bill has now progressed to the third reading, giving New Zealand employers a clearer view of the likely direction of leave reform. The Education and Workforce Committee reported the Bill back to Parliament on 13 July 2026 with recommended amendments and passed the second reading on 21 July 2026 - Ayes:Noes 67:55, then subsequently has moved through the Committee of the whole House.

The Bill has not become law yet. Employers must continue to comply with the Holidays Act 2003 until any new legislation comes into force. If the Bill is passed, a 24-month implementation period is expected before the new rules apply.

It is also important to remember that 2026 is an election year. While the Bill has momentum, nothing is certain until the legislation and election are final. The Bill may still be amended, delayed, or affected by the wider political environment. If passed, the Bill may be repealed after the election.

What Is Likely to Change?

The core direction of the Bill remains the move to a simpler, hours-based leave system. Annual leave and sick leave would accrue from day one in hours, rather than being provided as lump-sum entitlements after qualifying periods. 

The Bill also proposes a single hourly leave payment methodology, replacing several of the more complex calculations under the Holidays Act. Public holiday rules would be supported by a clearer Otherwise Working Day test, and qualifying casual or additional hours would attract a 12.5 percent leave compensation payment rather than accruing leave.

The Select Committee process appears to have refined the Bill rather than redesigned it. Employers should therefore take the proposed changes seriously, while avoiding premature changes until the final law is confirmed.

What Should Employers Do Now?

For now, preparation is more important than implementation. Employers should not change employment agreements, leave entitlements, or payroll formulas as though the Bill has already passed.

A practical starting point is to review how leave is currently managed across the business. This includes:

• employment agreements, 

• payroll system capability, 

• leave policies, 

• allowances, overtime, variable hours, casual arrangements, 

• and any manual processes that support leave calculations.

Payroll System Status:

• Businesses using older, highly customised, or unsupported payroll systems should pay particular attention to system readiness. Payroll providers will need time to update their systems once the legislation is final, and employers may need to plan ahead if a system change is likely.

Team Updates:

Employers should also think about communication. Employees may hear about the Bill and have questions. A clear message is that the law has not changed yet, but the business is staying informed and preparing for what may come next.

How Unlimit Can Help

Unlimit is monitoring the progress of the Bill and can help you understand what the proposed changes may mean for your business. If you would like to assess your readiness or identify likely pressure points, get in touch with the Unlimit People Strategy & Capability team.

In an election year, nothing is certain until the legislation is final. Being informed now will put your business in a stronger position to respond when the time comes.

Brief FAQ: Employment Leave Bill

Has the Employment Leave Bill become law yet?

No. The Bill has been reported back from the Select Committee and is still progressing through Parliament. Employers must continue to comply with the Holidays Act 2003 until any new legislation comes into force.

Is the Bill definitely going to pass?

Not necessarily. The Bill has momentum, but 2026 is an election year and nothing is certain until the legislation is passed. It could still be amended, delayed, or affected by the political environment.

When is the new law likely to take effect?

If passed, the current proposal includes a 24-month implementation period before the new legislation comes into force.

What is the biggest proposed change?

The biggest change is the move from leave based mainly on days and weeks to an hours-based system. Annual leave and sick leave would accrue from day one in hours.

Will employees still get annual leave?

Yes. Annual leave would still exist, but it would accrue progressively in hours rather than becoming available as a four-week entitlement after 12 months.

What happens to sick leave?

Sick leave would also accrue from day one in hours, rather than being granted after six months. A cap on accumulated sick leave is still proposed. Casual employees will no longer be eligible for Sick leave.

How will leave be paid?

The Bill proposes a single hourly leave payment methodology to replace several of the current Holidays Act calculations.

What is proposed for casual employees?

Qualifying casual hours, and certain additional hours, would generally receive a 12.5 percent leave compensation payment rather than accruing leave.

Should employers change agreements now?

No. Agreements and payroll settings should not be changed solely because of the Bill until the legislation is final.

What should employers do now?

Stay informed, continue complying with the Holidays Act, review payroll system readiness, identify likely impacts, and begin high-level transition planning.

Do historical Holidays Act issues still matter?

Yes. Current and historical Holidays Act obligations remain. The Bill does not remove responsibility for existing non-compliance or underpayments.

How can Unlimit help?

Unlimit can help assess likely business impacts, review payroll and people processes, and support transition planning once the legislation is finalised.

Key Takeaway

The proposed direction is clearer, but the Bill is not final. Employers should prepare, but not implement changes, until the legislation has passed.

Sources Used

• MBIE - Holidays Act reform: Employment Leave Bill.

• Employment New Zealand - Employment Leave Bill 2026.

• Unlimit - The Employment Leave Bill Explained: What Employers Need to Know.

• MBIE key changes employment leave system factsheet.