Parliament has passed the Employment Leave Bill, scrapping the Holidays Act 2003 and replacing it with a system that shifts leave accrual from days to hours and lets workers cash in some of their annual leave.

Workplace Relations and Safety Minister Brooke van Velden sponsored the bill, which also makes related changes to other legislation. It was introduced on 9 March 2026, debated in the House on 12 March, and passed on 29 July 2026 (RNZ).

Under the new law, annual leave and sick leave build up in hours rather than days. All employees, including casuals, can access annual, sick, bereavement, and family violence leave from their first day of work. Workers can cash in up to 25% of their total annual leave balance each year.

Additional and casual hours will not build up annual or sick leave. Instead, employers must pay a 12.5% leave compensation payment on top of those hours (RNZ).

The law also changes how alternative leave works for public holidays. Employees build up one hour of alternative leave for every hour worked on a public holiday that is an otherwise working day. That alternative leave can be cashed up at any time (Business Canterbury).

The reform pathway began with targeted consultation by the Ministry of Business, Innovation and Employment (MBIE) in September 2024 on a draft bill. Cabinet agreed to the policy proposals in September 2025, with MBIE describing the replacement as simpler and more workable (MBIE). The select committee report on the bill was published on 12 March 2026 (Select Committees).

All three opposition parties — Labour, the Greens, and Te Pāti Māori — voted against the bill. Labour MP Phil Twyford said the legislation put administrative efficiency for employers ahead of part-time and casual workers (RNZ).

The Public Service Association (PSA) campaigned heavily against the bill. National secretary Fleur Fitzsimons said 200,000 workers faced a pay cut if the bill passed (RNZ).

The changes carry a 24-month lead-in time for businesses and payroll providers to prepare. Employers will have an additional year after the law comes into force to update leave terms in employment agreements (RNZ).

The broader context here is that the Holidays Act 2003 was widely regarded across the employment relations field as difficult to administer compliantly. Moving to hours-based accrual is designed to fix that. But it also means payroll systems, employment agreements, and collective contract clauses built on the old day-based framework will need to be rebuilt from the ground up.

The 12.5% leave compensation payment for additional and casual hours is the provision that drew the sharpest opposition fire. The government says it compensates workers who do not accrue leave on those hours. The PSA's counter-argument is that a cash payment instead of accrued leave amounts to a reduction in entitlement for a large cohort of workers, particularly those in casualised or part-time roles where additional hours make up a significant share of income. Twyford's critique tracks the same fault line: the bill's efficiency gains for employers sit alongside a structural change in how casual and additional hours are treated, and whether that constitutes a fair trade depends on which side of the bargaining table you sit on.

The day-one access provision is a clear expansion of entitlements for casual workers, who under the current framework often face waiting periods before qualifying for leave. Whether that offset is enough to quiet the union opposition that accompanied the bill through the House is another matter. The PSA's 200,000-worker figure signals the scale of the constituency the union believes is adversely affected, and the three-party opposition vote means the reform has no crossbench consensus behind it.

For practitioners, the implementation timeline is the immediate priority. Payroll vendors will need to build for hours-based accrual, the 12.5% compensation calculation, alternative-leave accrual on public holidays, and the cash-up provisions. Employment agreements will need review and amendment within the statutory window. The lead-in period gives the sector breathing room, but the complexity of migrating from a days-based to an hours-based system across an entire workforce should not be underestimated.