The Employment Leave Act 2026 received Royal assent on 6 August 2026 and replaces the Holidays Act from 6 August 2028. Casual and extra hours move from 8% PAYG holiday pay to a 12.5% leave compensation payment.
By Brett Ransley • 31 Aug 2026
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The Employment Leave Act 2026 received Royal assent on 6 August 2026. It replaces the Holidays Act 2003 from 6 August 2028. If you hire casual, seasonal, or mixed-hours staff, this is the leave change to plan for — not something to switch on in payroll today.
Until 6 August 2028, the Holidays Act still applies. Genuine casual staff can still be paid 8% holiday pay as you go, shown clearly on the payslip. The new rules start from the beginning of each employee’s first pay period on or after 6 August 2028.
Employment New Zealand and MBIE have published the outline. Detailed payroll-calculation guidance for software providers is still being released in stages through late 2026 and 2027. This post covers what is already confirmed, and what it means for casual and seasonal employers.
What is changing, and when?
The Act received Royal assent on 6 August 2026 and comes into force on 6 August 2028. That two-year gap is deliberate: payroll providers and employers are expected to use it to update systems, agreements, and records.
From 6 August 2028, leave is earned, taken, and paid in hours rather than weeks. Annual leave and sick leave accrue from day one against an employee’s standard hours. Extra hours and casual hours do not build a leave balance. Instead they attract a leave compensation payment (LCP).
Official sources: Employment Leave Act 2026 — Employment New Zealand, Changes to leave coming in 2028, and MBIE’s Employment Leave Act page.
Standard hours, additional hours, and casual hours
The new Act splits work into three buckets. That split decides whether leave accrues, or whether the 12.5% payment is made instead.
- Standard hours — the usual hours in the employment agreement. Annual leave and sick leave accrue on these from day one, in hours.
- Additional hours — hours above the standard pattern. No extra annual or sick leave accrues on these. A leave compensation payment is paid instead.
- Casual hours — hours for genuinely casual engagements. Same treatment as additional hours: no leave accrual, leave compensation payment each pay.
Leave is taken hour-for-hour, including part days. When leave is paid, the same hourly leave pay rate is used (based on the employee’s lowest hourly rate for the day the leave is taken). Public holiday “otherwise working day” tests and alternative holidays also move to this hours-based system.
The 12.5% leave compensation payment
This is the line that matters most for casual and seasonal payroll.
Today, genuine casuals are usually paid 8% holiday pay on top of gross earnings, labelled on the payslip. From 6 August 2028, additional and casual hours instead get a leave compensation payment of at least 12.5% of the ordinary hourly rate for each of those hours, in every pay cycle. That payment is in lieu of annual leave and sick leave accrual on those hours.
Employment New Zealand’s guidance for payroll providers says software needs to:
- apply the LCP to additional and casual hours only
- calculate at least 12.5% of the ordinary hourly rate for each of those hours
- handle staff who move between standard hours and casual hours
- include the LCP in each pay cycle
A simple illustration (not a payslip): a casual hour at $25.00 currently carries $2.00 of 8% holiday pay. Under the new minimum LCP, that same hour carries $3.13 (12.5%). PAYE, ACC, and KiwiSaver still apply to taxable earnings in the usual way — this example is only the leave loading, not a full pay calculation.
What does not change until 2028
Do not change your current casual payslips just because the Act has passed. Until 6 August 2028:
- the Holidays Act 2003 is still the law
- 8% pay-as-you-go holiday pay remains the usual method for genuine casual and short fixed-term work
- that 8% should still be identifiable on the payslip, on top of the ordinary rate
- permanent and regular part-time staff still accrue annual leave in weeks, not the new hours formula
If a role is not genuinely casual — regular hours, ongoing expectation of work — 8% pay-as-you-go is already the wrong tool. That does not change in the next two years.
What employers should do in 2026
Employment New Zealand’s preparation timeline starts now, while the Holidays Act still applies. For a café, orchard, events crew, or labour-hire book, a sensible 2026 list is:
- Learn the three hour types and write down which of your people are standard, mixed, or casual.
- Check employment agreements. If they only say “casual” and “8% holiday pay”, you will need a 2028 version that talks about standard hours and the leave compensation payment.
- Clean up hours and leave records. Conversion of existing balances will be easier if the data is already accurate.
- Do not promise staff the 12.5% rate before 6 August 2028 unless you are choosing to pay above the current Holidays Act minimum.
- Ask your payroll provider (or your own process) when they will support hours-based accrual and the LCP. Two years is not long once you include testing, agreements, and a busy season.
If agreements are still not updated when the Act starts, Employment New Zealand says employers must provide whichever entitlement is more favourable to the employee until August 2029. After that, the Employment Leave Act minimums apply automatically. That is a reason to plan the paperwork, not a reason to ignore it.
What this means for Go Casual
Go Casual is built for DIY New Zealand payroll: casual, seasonal, contractor, part-time and full-time staff, with 8% holiday pay on casual payslips, PAYE, ACC, student loan, KiwiSaver, and payday filing.
We are not switching the app to 2028 leave rules early. Until 6 August 2028, pay runs should keep using the Holidays Act — including 8% pay-as-you-go holiday pay where that is the right method.
What we are doing now is planning the leave engine for hours-based accrual on standard hours, and the 12.5% leave compensation payment on additional and casual hours, so it is ready when the law actually changes. Employment New Zealand is still publishing the detailed calculation methods for payroll software. We will follow that guidance, not guess.
Final thoughts
The Employment Leave Act is passed, but it is not in force. You have until 6 August 2028. For casual and seasonal employers the headline is simple: today’s 8% holiday pay on casual hours becomes a 12.5% leave compensation payment, leave for regular hours starts accruing in hours from day one, and your agreements and hour records need to be ready.
If you already run genuine casuals through Go Casual with 8% holiday pay on the payslip, keep doing that. When the 2028 rules land, the same people should be able to stay on the same app — with the new leave math underneath.
Read the official pages first: Changes to leave coming in 2028 and how payroll providers can get ready.