What are the key changes?
On 23 September 2025, the New Zealand Government announced its updated approach to amending the Holidays Act 2003 (the Act), to make the rules surrounding leave straightforward and easier to understand. The proposed reforms are currently being drafted in the Employment Leave Bill (the Bill) and aim to address long-standing issues with calculating leave entitlements and payments, deliver simplicity for employers, and provide transparency for employees.
The Act has been a source of continual compliance challenges for New Zealand employers, particularly in industries with variable or non-traditional work patterns. This has led to costly remediation across both public and private sectors, highlighted most notably by significant settlements within the health sector.
Numerous reviews since 2001 have emphasised the complexity of the Act’s provisions for annual leave, sick leave, and other entitlements. In response, the previous Government established the Holidays Act Taskforce in 2018, and after several years of policy work and consultation, broad reforms are now imminent. The new legislation is expected to come into force following a 24-month implementation period after the Bill passes.
At present, annual leave is granted as a lump sum after 12 months’ continuous service and sick leave after six months’ continuous service, with a new entitlement arising every 12 months. Annual leave also scales to match changes in...
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