Employment Leave Act 2026 – What It Means for Rural Employers 

The New Zealand Government has passed the Employment Leave Act 2026, replacing the Holidays Act 2003 after years of feedback that the existing legislation was complex and difficult to apply. The new Act introduces a significant change to the way leave is accrued, calculated, recorded and paid. 

However, the changes do not take effect immediately. The new legislation is scheduled to come into force on 6 August 2028, providing employers and payroll providers with time to prepare for the new system. 

For many employers in farming and the primary industries, the changes may be a positive step. The current Holidays Act has been particularly challenging for businesses where employees work variable hours, seasonal peaks, rostered shifts or flexible arrangements – all common across dairy, sheep and beef, horticulture, viticulture and agribusiness. 

The aim of the new legislation is to make leave easier to understand, calculate and administer. 

The law has not changed yet. 

This is an important point for employers to understand. 

Employers must continue to follow the current rules in the Holidays Act 2003 until the new Employment Leave Act starts on 6 August 2028. 

Employers cannot start applying the new leave rules early, even if your business is ready to make the change. 

This means that, until 6 August 2028: 

• The Holidays Act 2003 continues to apply. 

• Current rules for annual leave, sick leave, bereavement leave, family violence leave and public holidays remain in place. 

• Employers must continue using the current Holidays Act rules to calculate and pay leave. 

• Payroll systems should not be changed to operate under the new Act before it comes into force. 

The transition period is an opportunity to prepare for the changes, not to implement them early. 

What’s Changing? 

One of the most significant changes is that leave entitlements will move to an hours-based system. 

Under the new framework, annual leave and sick leave will be accrued and taken in hours, rather than being based on the current weeks and days model. This is intended to provide a more consistent approach for employees whose working patterns vary. 

Employees will also begin accruing annual leave from their first day of employment, rather than waiting until they reach 12 months’ service before becoming entitled to annual holidays. 

Another significant change is the move towards a consistent hourly approach to leave payments. The new system is designed to reduce the complexity employers currently face when determining which calculation method applies under the Holidays Act. 

The Act also introduces a 12.5% Leave Compensation Payment for qualifying additional and casual hours worked. Instead of those hours generating additional annual and sick leave accrual, qualifying employees will receive a payment recognising the leave component of those hours. 

This could be particularly relevant to rural businesses where employees work additional hours during busy periods such as calving, lambing, harvesting, pruning, shearing or other seasonal workloads. 

The new legislation also introduces changes to: 

• How public holidays and alternative leave are determined and recorded. 

• How annual leave can be cashed up. 

• Leave entitlements for employees with variable working patterns. 

• Leave and employment records. 

• Payslip and leave balance information. 

• The treatment of parental leave. 

• The way employers determine whether a day is an “otherwise working day.” 

What Does This Mean for Rural Employers? 

The changes are particularly relevant to rural employers because many farming and primary-sector businesses don’t operate on a traditional Monday-to-Friday, 40-hour working week. 

Employees may work different hours depending on the season, weather, livestock requirements, production demands or harvest schedules. Some employees may also work additional hours during peak periods before returning to their usual working pattern. 

The new system is intended to better accommodate these different working arrangements by distinguishing between standard hours, additional hours and casual hours. 

For rural employers, this means having a clear understanding of how employees’ hours are structured will become increasingly important. 

Accurate time and attendance records will also be essential. 

What Should Employers Do Now? 

Although the new Act does not take effect until 6 August 2028, the transition period provides a valuable opportunity to prepare. 

Over the next two years, employers should consider: 

• Reviewing employment agreements and identifying where changes may eventually be required. 

• Talking with your payroll provider about how the new system will be supported. 

• Checking that employee records accurately reflect hours worked and working patterns. 

• Identifying employees who regularly work additional or variable hours. 

• Reviewing how seasonal and casual employees are engaged and paid. 

• Considering whether current rostering and time-recording processes provide the information that will be needed under the new system. 

• Planning for future changes to payroll processes, policies and employment documentation. 

How Rural Directions Can Help 

Employment legislation continues to evolve, and understanding what the changes mean for your business can be challenging when you’re focused on running a farm or any business. 

The new legislation is designed to make leave simpler for everyone.  Whether you need assistance reviewing employment agreements, updating HR policies, or ensuring your employment practices remain compliant, our HR team is here to support you. 

For now, the message is simple: prepare for the change, but continue following the Holidays Act until 6 August 2028.