The Employment Leave Bill has now been introduced to Parliament.
by Natalia Mamea
Payroll changes are coming - but don’t panic. Just don’t ignore them either.
Over the last couple of months I’ve been talking about 2026 being a “payroll reset year.” That message still stands.
There are several employment and payroll changes happening around the same time - KiwiSaver contribution changes, ongoing minimum wage updates, privacy obligations - but the big one on the horizon is the replacement of the Holidays Act.
The Employment Leave Bill has now been introduced to Parliament.
You can read the draft bill here: https://www.legislation.govt.nz/bill/government/2026/259/en/latest/#LMS1576754
This is the most significant change to leave and payroll legislation in New Zealand in decades.
The goal is to simplify a system that has caused confusion, compliance failures and billions of dollars in remediation across both public and private sectors.
But “simpler” doesn’t mean no work for employers.
In fact, there is quite a bit of groundwork that organisations should be starting now.
I do have to say though, what a time to be working in payroll in Aotearoa New Zealand!
Many people in the profession today weren’t around when the Holidays Act 2003 came in. Now they’ll be part of shaping what replaces it.
And for the payrollers among us who remember those earlier changes - or even the 1981 Act - this feels like a real full-circle moment.
A little exciting.
A little nerve-wracking.
But definitely significant.
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What’s actually changing?
At a high level, the proposed system moves away from weeks and days, and towards hours-based leave from day one.
Leave would accrue as employees work, rather than appearing only after certain milestones.
Payments for leave would also move toward a single hourly rate approach, instead of the multiple and often times ambiguous calculations used today.
Another key concept in the Bill is the idea of “standard hours” previously referred to as 'contracted hours' in the earlier messaging.
"Standard hours" will become the foundation for how leave accrues and when it can be taken, so it's highly important each organisation can define this for their workforce.
If employment agreements don’t clearly describe an employee’s working pattern, organisations may need to rely on rosters or established work patterns to determine those hours.
There is also a proposed concept called a Leave Compensation Payment (LCP) - a 12.5 percentage payment applied to casual hours, and additional hours (to standard hours) worked.
For businesses with overtime, variable hours or casual staff, this will be something worth modelling early (please, please start looking into your workforce patterns soon).
So, while simplification is expected in areas where we currently have major complexity, the act of 'simplifying' will require much work and effort in defining and unwinding some legacy setup.
Several legal briefings have already been released analysing the Bill, and organisations should review the draft legislation directly as it progresses through Parliament.
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The good news
This isn’t happening overnight.
Once the legislation passes, the expectation is a transition period of around two years before the new system fully takes effect.
That’s intentional, thank goodness - payroll systems, payroll providers, employment agreements, policies and processes will all need time to adjust, not to mention our trusted payroll teams who will need a decent amount of adjustment time too.
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Where preparation really helps
The current Holidays Act 2003 has been one of the most challenging pieces of payroll legislation many organisations have had to implement, and many are still struggling with today.
Across both public and private sectors it has led to years of interpretation issues, remediation programmes and significant cost.
That’s exactly why the proposed Employment Leave Bill matters so much.
This is a rare opportunity for employers, payroll professionals and organisations to understand the proposed changes early and provide feedback through the public consultation process.
The voices of the people who will actually have to implement the legislation within software and payroll day-to-day processes are so important to be heard during public submissions.
The last thing anyone wants is to move from one complex system into another that creates new challenges.
At the same time, payroll legislation never sits in isolation. Behind any law change there is always a layer of practical work organisations need to work through.
Payroll legislation touches:
- workforce planning
- employment agreements
- allowances and pay structures
- payroll systems
- budgeting and forecasting
- governance oversight
Starting the thinking early makes the transition much easier later on.
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Three things worth starting now
1. Get your current payroll house in order
If there are existing Holidays Act issues, it’s best to deal with those before trying to transition to a new system.
2. Understand your workforce patterns
What are your employees’ true standard hours?
Where do additional hours or overtime occur?
What could the proposed changes mean, cost-wise (there will be savings, and added costs - be aware of these)?
How could the proposed changes impact workplace culture?
This will matter much more under the new framework.
3. Don’t assume your payroll system will “handle it.”
Software helps, and you should definitely speak with your payroll provider sooner rather than later. Chances are, your payroll provider will be communicating updates with you soon.
But employers are still responsible for compliance.
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What this comes back to
Payroll isn’t just about paying people.
It’s about trust.
When payroll is right, people don’t have to wonder whether they’ve been paid fairly or correctly.
That matters for employees, and it matters for employers too.
If you're in payroll or HR in Aotearoa New Zealand right now, it's going to be an interesting few years, perhaps a bumpy ride, but one that we all deserve to proudly cross the finish line!
If you need some help to get the ball rolling, start with a Payroll Readiness Scan today, or flick me an email.
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Nāku noa, nā,
Natalia Mamea
natalia@nataliamameaconsulting.co.nz