The Holidays Act is finally gone. Your casual hours get dearer and your part-timers get cheaper

Five days ago the law that has caused more payroll headaches than anything else in New Zealand was replaced. If you run a salon or a barbershop with a mix of full-timers, Saturday part-timers and a junior you text when it gets busy, this changes what each of those hours costs you. Not yet, but the direction is now fixed and the arithmetic is worth knowing while you can still do something with it.

Nothing in your pay run changes until 6 August 2028

Straight answer to what you searched. The Employment Leave Act 2026 got Royal assent on 6 August 2026 and replaces the Holidays Act 2003 on 6 August 2028, applying from the first pay period that starts on or after that date. Until then the Holidays Act still runs your payroll, and MBIE is blunt that you cannot jump early: employers cannot start following the new Act before it comes into force, even if their payroll is ready.

So this is not a bill to pay this quarter. It is a two-year warning about which of your hours get cheaper and which get dearer, and there is one thing on the list that is costing you money today.

The Act sorts your team into three kinds of hours

Everything else follows from this, so it is worth two minutes.

• Standard hours are the hours someone is required to work under their employment agreement, and that you must pay them for. Paid breaks count.
• Additional hours are hours worked beyond standard hours that attract extra pay, that you are not required to offer and the person is free to refuse.
• Casual hours are hours worked by someone whose agreement does not require you to offer work and does not require them to accept it. Nobody can have standard hours and casual hours in the same role.

Standard hours earn leave. Additional and casual hours do not; they get cash instead. Which means the wording in your employment agreements, not what actually happens on the floor, is what decides your cost.

Your Saturday part-timer gets cheaper

Today, sick leave is a flat 10 days a year once someone has been with you six months, and it does not matter whether they work five days a week or two. A stylist who does Thursday late and Saturday gets exactly the same 10 days as your full-time senior.

From 2028 that stops. Sick leave accrues from day one at 0.0385 hours for every standard hour worked, which gives the equivalent of 10 days a year to someone working five days a week on the same hours each day. There is a cap of 160 hours, after which accrual pauses until some is used.

Do it on a two-day part-timer working two 8-hour days, 16 hours a week:

• Today: 10 sick days a year, and each of her days is 8 hours, so up to 80 hours of paid absence a year.
• From 2028: 16 hours a week times 52 weeks is 832 standard hours, times 0.0385 is 32 hours a year.

That is about 48 hours of difference, roughly $1,150 a year at the adult minimum wage of $23.95, more if you pay above it. Treat that as the maximum, not a forecast, because most people do not use every sick day. Annual leave for the same person does not change: 832 hours times 0.0769 is 64 hours, which is exactly her four weeks.

Your casual hours get dearer, and it stops being optional

Right now you can agree with a genuine casual to pay holiday pay as you go at 8% of gross earnings instead of giving annual leave, and you are supposed to keep checking that their work pattern still qualifies.

From 2028 that agreement disappears and a leave compensation payment takes its place. Every additional hour and every casual hour carries 12.5% of the person's ordinary hourly rate, paid in the pay period the hours are worked, shown as a separate line on their pay statement. It replaces both annual leave and sick leave on those hours.

For a plain hourly casual with no weekend loading, that is the difference between $80 and $125 on every $1,000 of casual wages. It is no longer something you agree to. It is the price of the hour.

Two details that catch people out:

• It stacks on top of penal rates. MBIE's own worked example: someone on $30 an hour paid double time for extra hours gets $60 for the hour plus a separate $3.75 of leave compensation, because the 12.5% is calculated on the ordinary rate, not the overtime rate.
• It applies to additional hours worked by your rostered staff too. If you routinely ask a 24-hour stylist to cover a fifth day, those hours will carry a visible 12.5% instead of quietly feeding into a leave calculation later.

If you pay commission, leave pay drops

This is the one nobody in the trade is talking about. Today, leave pay involves comparing ordinary weekly pay with average weekly earnings and taking the higher, which drags commission and extra hours into the rate.

From 2028 there is one rate for every kind of leave: for a waged employee, the lowest hourly rate payable for the shift the leave is taken from. Fixed allowances keep being paid in full. Commissions, bonuses and variable allowances are not in the rate at all. If someone is paid wholly or partly on commission and that leaves their hourly rate below the floor, leave must still be paid at no less than the minimum wage.

MBIE says it plainly in its own scenario for a salary-plus-commission salesperson: he "will see a slight reduction in leave pay". For a salon where seniors earn a real slice of their pay on service or retail commission, that is a permanent, if modest, reduction in the cost of every week they take off.

The part that is costing you money right now

You still have to fix historical Holidays Act underpayments. That obligation survives the new Act completely.

What the Act adds is a statutory remediation process, with the detail to come in regulations, that lets an employer use an estimation method instead of rebuilding years of pay runs by hand. Two things about it matter to you.

First, the reach. It covers underpayments in the six-year period immediately before the new law takes effect. Count back from 6 August 2028 and that window opened in August 2022. The pay run you did last Wednesday is inside it. Every month you leave a leave calculation wrong is another month of compensation you will owe with interest on your attention, not just your money.

Second, the clock. The process becomes available when the Act commences, and an employer using it gets 2 years and 2 months from commencement to notify, calculate and pay current employees, and 4 years and 2 months for former employees. So the tidy-up has an end date, which is unusual and useful.

A few smaller changes worth knowing now

• Bereavement leave and 10 days of family violence leave become available from day one to everyone, including people working casual hours.
• Annual closedown notice goes from 14 days to 21 days, and must be in writing.
• Pay statements become compulsory every pay period, with leave information on them.
• On commencement, casual employees' existing annual holiday entitlements get paid out. If you have casuals accruing annual holidays rather than taking pay as you go, budget for a cheque in August 2028.
• You then have a further year, to 6 August 2029, to bring employment agreements into line. Until then, any term in an agreement that is more favourable than the Act still wins.

What it does to what your salon is worth

Leave has always been the liability a buyer cannot see properly. It sits in the payroll system in weeks and portions of weeks, nobody can reconstruct it, and so it turns up in diligence as a warranty, an indemnity and an argument. This Act does something quietly useful to that.

The 2028 conversion forces every balance out of weeks and into hours, using formulas set in the Act. Your leave liability stops being an estimate and becomes a number. Historic exposure gets a defined six-year window and a defined deadline instead of a vague "how far back could this go". And in a sale, leave stops being an automatic payout: the new Act makes the treatment of leave entitlements a matter to be negotiated between the old and the new employer, including how the liability is apportioned, so untaken annual leave and alternative holidays can transfer with the staff rather than be settled in cash on the day.

Read that as a shift in where the money is decided. Under the current regime an asset sale generally ends employment with you and you write the leave cheque. From 2028 it is a line you argue about. Sellers who arrive with clean, converted, believable leave records will argue it well. Sellers who arrive with a payroll nobody trusts will hand the number to the buyer's accountant and accept whatever comes back, which is the same thing that happens to every other figure they cannot evidence. See due diligence for what that conversation actually looks like.