Payroll Update - September

Moving to Hours-Based Accrual
The new Act introduces an hours-based leave system, replacing the current days-and-weeks approach. Leave will accrue from day one of employment and be calculated using standard, additional, or casual hours, with updated rules across all major leave types.

Public Holidays and the "Otherwise Working Day" Test
A new "otherwise working day" (OWD) test will determine entitlements around public holidays. Where an employee works a public holiday that would otherwise have been a working day for them, their alternative leave entitlement will now accrue hour-for-hour, replacing the more subjective assessments required under the current law.

Payslips, Records, and Closedowns
Employers will face new record-keeping obligations, including pay statements that clearly itemise pay and leave information for every pay period in which an employee works or takes paid leave. Additional requirements will apply to record-keeping for working hours, rosters, leave, and public holiday calculations.

Annual closedown provisions are also being clarified. Employers will be limited to one closedown period per calendar year and must give affected employees at least 21 days' written notice before it begins.

Annual leave

• Accrues from day one, proportional to standard hours, rather than after a qualifying period

• Taken in hourly increments instead of full days — a significant help for employees on variable hours

Annual leave cash-up

• Employees can request to cash up 25% of their annual leave entitlement every 12 months, timed to their work anniversary

• Employees with more than 4 weeks' leave can cash out a bigger chunk in absolute terms

Sick leave

• Also earned from day one, proportional to hours worked, up to a 160-hour cap

• Replaces the current model of granting 10 full days upfront — part-time staff will now accrue based on actual hours rather than getting a flat 10 days

Bereavement and family violence leave

• Stays as a fixed number of days, but becomes accessible from day one of employment rather than after a qualifying period

Casual employees ("pay as you go")

• The loading rate rises from 8% to 12.5% to cover all leave types

• In exchange, casuals lose eligibility for paid sick leave and bereavement leave

Additional hours

• Permanent employees who regularly work above their standard hours get a 12.5% loading on those extra hours

• Likely to matter most for businesses running rosters with minimum guaranteed hours where staff routinely work over

Public holidays

• Simplified to a single eligibility test: did the employee work 50% or more of that day in the preceding 13 weeks

Alternative holidays

• Accrue hour-for-hour rather than as a full day

Leave calculations

• Based on the employee's base wage; variable pay like bonuses and commission is excluded, while fixed allowances remain included

Parental leave

• Annual leave taken after parental leave will be paid at the standard rate — the previous "override" rules that reduced payment amounts are removed

Employment New Zealand’s website has suggested a preparation timeline and can be found at the link below:

www.employment.govt.nz/leave-and-holidays/changes-to-leave-coming-in-2028/suggested-preparation-for-payroll-providers-employers-and-employees