A new view of holidays
Alcohol licensing lawyer Pervinder Davies explains the changes in the new Employment Leave Bill and what it means for your business...
For more than 20 years, one piece of legislation has quietly caused more headaches in New Zealand payrolls than almost any other. It wasn’t the tax code, and it wasn’t health and safety law: it was the Holidays Act 2003, a well-intentioned piece of legislation meant to guarantee fair leave and public holiday pay, which instead became infamous for being almost impossible to apply correctly.
The problem was never the principle. Everyone agreed employees should get paid holidays, sick leave and a fair deal for working on public holidays. The problem was the mechanics. Concepts like “otherwise working day”, relevant daily pay, and average weekly earnings were left open to interpretation and businesses with irregular rosters, casual staff, or seasonal trading patterns found themselves constantly second-guessing their calculations.
Government audits eventually revealed underpayments across thousands of employers, from small businesses to hospitals and even government departments, totalling hundreds of millions of dollars.
On 29 July this year, that chapter closed. Parliament has passed the Employment Leave Bill, formally repealing the Holidays Act 2003 and replacing it with the Employment Leave Act 2026. Workplace
Relations and Safety Minister Brooke van Velden described it as reform to “one of the most complex and problematic areas of our employment law”. The new Act moves leave from a system based on days and weeks to one based on hours – a change designed to better reflect how modern, flexible workforces actually operate.
“Few sectors will feel this change more directly than pubs, bars, restaurants, and alcohol retailers.”
Why hospitality and alcohol retail should pay close attention
Few sectors will feel this change more directly than pubs, bars, restaurants, and alcohol retailers. Hospitality runs on exactly the kind of workforce the old Act struggled with: casual bar staff, part-time floor staff, and rosters that spike around public holidays like New Year’s, Easter, and regional anniversary days over summer – precisely when licensed premises are busiest and public holiday pay rules matter most.
Under the new Act, the workforce is split into standard, additional, and casual hours. Casual and additional hours won’t accrue annual or sick leave in the traditional sense. Instead, employers will pay a 12.5% leave compensation payment on top of ordinary wages for those hours.
For an industry that leans heavily on casual staffing, this is a direct and immediate cost consideration worth modelling now, well ahead of implementation.
Public holiday pay itself is also changing. A new “otherwise working day” test will determine entitlements, replacing the old, frequently disputed method. Any premises that regularly trades on public holidays should expect this to reshape how holiday pay is calculated and budgeted.
There’s also a formal remediation process being introduced for historic Holidays Act underpayments. Operators who have had complex rosters, high staff turnover, or manual payroll processes in the past should consider whether a review of past liability is prudent before the new regime locks in.
The transition window
Most employers have a two-year window from Royal assent to update systems before the Employment Leave Act 2026 takes full effect. Payroll providers now have a fixed specification to build against and most businesses will be waiting on software updates rather than doing manual recalculations themselves.
Two years sounds like a long runway. In reality, for licensed hospitality businesses it’s a good idea to start reviewing rosters, casual employment agreements, public holiday staffing plans, and payroll processes, so that when the new Act comes into force, your business is ready rather than scrambling.
If you hold an alcohol licence and want to understand what this reform means for your staffing costs, compliance obligations, or existing employment arrangements, now is the time to have that conversation.
Pervinder Davies specialises in alcohol licensing law and is a director of Pervinder Davies Law in Christchurch.
pervinderdavieslaw.co.nz
