Big changes are coming to NZ’s leave laws—get ahead of the curve with our breakdown of the proposed Employment Leave Act 2025 and what it could mean for your business.
On 23 September 2025, the New Zealand Government announced a major legislative update: the Employment Leave Act 2025, which will replace the Holidays Act 2003.
The proposed Employment Leave Act introduces significant changes to leave entitlements and workplace compliance. While the Government has announced its intention to introduce the Act, it has not yet been drafted or passed. If enacted, businesses would have a 24-month implementation period to prepare.
We’ll explore the key changes and offer guidance on how they may affect your business operations.
Key proposed changes to the Employment Leave Act 2025
1. Annual leave
Employees would accrue annual leave from their first day of employment. This would replace the current 12-month wait period and allow leave to be taken in hourly increments. The Act proposes that employees could request to cash up 25% of their total annual holiday balance each year, offering more flexibility than the current limit of one week per year.
2. Sick leave
Sick leave is proposed to accrue from day one, replacing the current six-month eligibility requirement.
3. Parental leave
Employees would continue to accrue annual leave while on parental leave and be paid at their full rate when taking leave after returning to work.
4. Bereavement and domestic violence leave
Both types of leave would be available from the first day of employment and could be taken in part-day increments.
5. Casual workers
Casual employees would receive a 12.5% LCP on top of their wages, covering both annual and sick leave entitlements. This would replace the current 8% holiday pay model.
6. Mandatory pay statements
Employers would be required to provide clear pay statements each pay period, itemising pay and leave in a transparent and easy-to-understand format. This aims to improve clarity for employees and support compliance with the proposed entitlements.
How these changes affect small and medium businesses
Budgeting for increased leave
The move to proportional accrual and higher Leave Compensation Payments (LCP) may increase payroll costs. Businesses should review budgets and forecast accordingly to avoid financial strain.
Updating employment contracts
Employment agreements, policies, and handbooks would need to be revised to reflect the new entitlements. The proposed 24-month implementation period provides time to make these updates and ensure legal compliance.
Training and compliance
HR teams and managers should be trained on the proposed rules. Employers would also be required to issue detailed payslips outlining leave entitlements, which may require payroll system upgrades.
If enacted, the Employment Leave Act 2025 would mark a significant shift in New Zealand’s employment landscape. By proactively preparing for these changes, small and medium business owners can ensure future compliance.
Want to understand what this could mean for your business? We’re here to support you.
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