When the bulk of the Employment Leave Act 2026 comes into force on 6 August 2028, it will repeal the Holidays Act 2003, a piece of legislation widely regarded as complex and difficult to apply in practice.
The two-year transition is intended to give businesses enough time to prepare for the substantial changes ahead.
The key changes made by the Employment Leave Act 2026
Here’s a brief summary of the most significant changes:
How leave accrues
- Annual leave and sick leave will accrue based on hours, from the first day of employment, rather than the current days/weeks model.
Leave compensation payments
- Permanent staff – Hours worked on top of permanent workers’ contracted hours won’t accrue annual or sick leave. Instead, they will receive a 12.5% leave compensation payment (LCP) for every additional hour they work. This will be paid in their regular pay cycle.
- Casual employees – Casual workers will receive the leave compensation payment of 12.5% in their regular pay cycles, instead of 8% previously.
Cashing in annual leave
- Employees will be able to cash in up to 25% of their total annual leave balance every 12 months.
When family violence and bereavement leave are available
- Family violence leave and bereavement leave will be available from the first day of employment.
For more details about the new legislation, read our earlier article here. It includes a table comparing the new legislation with the existing regime in eight key areas.
Employers should start preparing now
The Holidays Act 2003 continues until the new Act comes into force on 6 August 2028. This means employers will need to continue to comply with the existing Act while also preparing for the new regime in 2028.
Businesses should start reviewing their payroll systems, leave policies, and employment agreements so they’re well prepared for the shift to the new Employment Leave Act when it comes into force.
During the two-year transition, Ford Sumner will be working with our clients to make sure their employment agreements and policies reflect the new changes. If you need help updating your key documents or would like advice on how the changes could affect your business, please contact Paul Gillespie at Ford Sumner.