Payroll Changes Are Coming in 1..2..3

2026 Is a Payroll Reset Year - Here’s What That Means for Employers

Several important employment and payroll changes are happening at the same time in Aotearoa New Zealand.

The biggest change is the replacement of the Holidays Act with the Employment Leave Bill, with draft legislation and public consultation expected in early 2026 (Holidays Act to be replaced | Ministry of Business, Innovation & Employment). Alongside this, employers must continue to meet their existing and new obligations for Tax, Minimum Wage, KiwiSaver, and the Privacy Act.

Together, these changes affect how people are paid, how leave is recorded, and how payroll and employee data is handled.

This is not just a payroll system issue; it actually never really was.

It is and always has been an employer responsibility; the payroll system is the tool to deliver those responsibilities.

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Why the Holidays Act Is Being Replaced

The current Holidays Act has been difficult to apply in practice and hasn't reflected the realities of our workforce which has led to widespread payroll errors across many sectors. All in all, the new proposed changes are long overdue and very welcome to many - but the devil is always in the detail, which you can read about the key changes here: key-changes-employment-leave-system-factsheet.pdf

The Employment Leave Bill is intended to:

• Simplify how leave is calculated
• Move away from complex formulas
• Make pay and leave easier to understand for employees
• Place greater emphasis on clear base pay and defined standard hours

While there is likely to be a 24-month transition period once the law is finalised, the preparation work for employers needs to start well before then.

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What This Means in Practice

For many organisations, especially those without Tier-1 payroll partners and small-medium businesses and not-for-profits who wear all different hats, this means:

• Understanding how staff actually work their hours - what's 'standard' versus 'additional' hours?
• Making sure pay rates are made up correctly - a good housekeeping exercise to ensure pay components match what's contractually expected
• Clearly separating base pay from allowances - the goal is to land on a clean 'base rate' and define what is a 'fixed' versus 'variable' allowance
• Using payroll systems properly - now is a good time to get under the hood of your payroll system and understand your unique configuration rules
• Ensuring trustees, boards, and leadership understand payroll risk - salary and wages is one of the largest business expenses, but often payroll is relegated to behind closed doors; it's time to shine a light and bring your execs into the conversation

This applies whether you have two staff or two hundred.

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This Is Bigger Than One Law

While preparing for the new leave legislation, employers must also continue to manage:

• Holidays Act compliance, make sure you're paying your people correctly under the current legislation
• Tax changes, as specified by Inland Revenue from 1 April 2026
• Minimum wage increases, from $23.50 to $23.95 per hour from 1 April 2026, including any impacts on pay structures
• KiwiSaver changes, minimum contribution rates increasing from 3% to 3.5% from 1 April 2026, and ensuring the associated change management is delivered well so employees know what's changing and what options they have
• Privacy Act changes, from 1 May 2026, businesses and payroll teams will need to notify employees when their personal information has been collected indirectly (i.e., from someone other than the employee themselves)

These are active obligations and cannot be paused or delayed. These need your active attention and action during 2026.

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You Don’t Need to Panic - But You Do Need to Act

You are not expected to:

• Fix everything overnight
• Predict the final legislation
• Become a payroll expert

You are expected to:

• Act in good faith
• Take reasonable steps
• Protect your people from harm

Payroll software providers do not carry legal responsibility.

Employers do.

Starting early allows organisations to prepare calmly and responsibly, rather than react under pressure later.

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A Simple Place to Start

If you’re unsure how prepared your organisation is for the changes ahead, a short payroll readiness scan can help you understand what matters most right now.

This is a practical, low-pressure way to identify:

• Areas of higher risk
• Immediate priorities
• What can wait until later

Remember, looking after payroll is part of looking after your people. If you don't know where to start, start with a Payroll Readiness Scan today.

If in doubt, please reach out. I'm here to help.

Nāku noa, nā,

Natalia Mamea

natalia@nataliamameaconsulting.co.nz