Before You Prepare for the Employment Leave Act, Check the Payroll You Have Now

The Employment Leave Act 2026 is now law, but employers cannot begin applying it early. The current Holidays Act remains in force until the new Act takes effect on 6 August 2028.

That creates an awkward question for employers: if detailed technical guidance is still being developed, what should payroll teams be doing now?

The answer is not to rush into reconfiguring the payroll system.

It is to understand whether the payroll environment you have today is accurate, compliant and ready to support the transition ahead.

The transition will not start with a blank payroll system

When the Employment Leave Act takes effect, organisations will not suddenly begin with clean employee records, perfect leave balances and newly designed employment arrangements.

They will transition using data and decisions created under the current Holidays Act. That includes:

employee and payroll records
leave balances and historical leave payments
contracted and actual working hours
employment agreements and workplace policies
rostering and time-and-attendance data
employees working multiple roles or changing work patterns
payroll rules, interfaces and system configuration

If those foundations are inaccurate, changing the legislation or updating the software will not correct them automatically.

Employment New Zealand makes this point directly. Its current employer guidance says organisations should check leave balances and leave-pay calculations, fix errors and pay any money owed before moving to the new law. It also warns that incorrect data may be carried forward and become harder to fix later.

That is why Employment Leave Act readiness should begin with the current state—not with the future-state configuration.

Should employers start implementing the ELA now?

No. The new rules cannot be applied before 6 August 2028, and further guidance is still expected on payroll systems, employment agreements, workplace policies, pay statements, record keeping and the conversion of leave balances.

An employer that starts making technical changes too early may later need to revise them when more detailed guidance becomes available.

But “do not implement yet” does not mean “do nothing”.

Employment New Zealand’s planning guide recommends that employers first learn about the changes, then identify agreements, policies and processes that may need updating. The later stages include reviewing payroll and employment data, planning system changes and completing implementation before go-live.

For employers with complex workforces, the amount of work required cannot be understood without first examining the current payroll environment.

What should a pre-implementation payroll audit examine?

A useful audit should go beyond checking a small sample of payslips. It should examine whether the organisation’s employment arrangements, payroll data, calculations and system behaviour agree with one another.

1. Holidays Act calculations and historical risk

The audit should test whether annual holidays, public holidays, alternative holidays, sick leave, bereavement leave and family violence leave have been calculated and paid correctly under the current law.

Where issues are identified, the organisation may need further analysis to determine the affected employees, historical period and potential remediation exposure.

The ELA does not remove these existing obligations.

2. Payroll and employment data

Employee records need to accurately reflect how people work in practice. Common areas requiring attention include changes in hours, irregular work patterns, multiple positions, allowances, bonuses, roster information and incomplete historical data.

Clean data is not simply an IT requirement. It is the basis on which future calculations, testing and implementation decisions will be made.

3. Employment agreements and payroll configuration

An employment agreement may describe one arrangement while the roster, manager practice and payroll system reflect another.

An audit should identify where contracted hours, additional hours, pay components, leave provisions and payroll rules do not align. This is particularly important for organisations with collective agreements, variable hours or employees working across multiple roles.

4. Payroll-related systems and interfaces

Payroll does not operate in isolation. Time and attendance, rostering, HRIS, onboarding, employee transfers and finance systems can all affect the information used to calculate pay.

The audit should therefore examine how data enters payroll, how it is interpreted and where manual intervention occurs. A calculation may be correct inside the payroll system but still produce the wrong result if the source data is incomplete or incorrectly mapped.

5. Controls, testing and payroll governance

System configuration alone does not prove compliance.

Employers also need to understand whether payroll rules have been tested against real workforce scenarios, whether interfaces are reconciled and whether changes are independently reviewed before go-live.

Testing should eventually cover calculation results, data conversion, integrations, exception handling and complex employee scenarios. These controls should be planned early, even though the final ELA testing cannot be completed until the technical requirements and system changes are sufficiently clear.

What does a sensible ELA readiness pathway look like?

For most organisations, the pathway will be broader than converting leave balances or installing a software update:

Audit and remediate → Clean and verify data → Design and configure → Test and assure → ELA go-live

Each stage depends on the one before it.

If an organisation begins configuring before understanding its current risk, it may design the future process around inaccurate assumptions. If it converts unverified data, it may carry historical errors into the new environment. If it updates the system without robust testing, it may not know whether the change works across the full workforce.

Who should consider starting earlier?

Employment New Zealand notes that its preparation dates are a general planning guide and may not suit every organisation.

Earlier assessment is particularly valuable for employers with:

large or decentralised workforces
collective employment agreements
variable or unpredictable working patterns
multiple payrolls or payroll-related systems
employees holding multiple roles
significant manual payroll processes
previous Holidays Act concerns or unresolved remediation
an HRIS, payroll or time-and-attendance transformation already planned

For these employers, two years can appear generous until the dependencies, bargaining requirements, data gaps, vendor timelines and testing effort are properly mapped.

The most useful first step is clarity

There is no need to rush into full Employment Leave Act implementation while detailed guidance is still being developed.

There is, however, a strong reason to establish whether your current payroll is ready to become the foundation of the new one.

An independent payroll audit can identify existing compliance issues, unreliable data, configuration gaps and process weaknesses before they become part of a larger transition programme.

Premium Payroll Solutions brings experience from more than 100 payroll remediation projects over the past 11 years, combining payroll legislation knowledge with practical system, data and operational expertise.

If you want to understand your current position before planning ELA implementation, talk to PPS about an independent payroll audit and readiness assessment.

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Frequently Asked Questions

When does the Employment Leave Act take effect?

The Employment Leave Act 2026 is scheduled to replace the Holidays Act on 6 August 2028. Employers must continue following the Holidays Act until then.

Can employers implement the Employment Leave Act early?

No. Employment New Zealand states that employers cannot begin following the new rules before the commencement date. They can, however, assess current payroll risks and plan future system, agreement and process changes.

Does the ELA remove existing Holidays Act liabilities?

No. Employers remain responsible for correcting historical underpayments and meeting their obligations under the current Holidays Act.

Is an ELA readiness review only a payroll system review?

No. Readiness may involve payroll and employment data, employment agreements, workplace policies, rostering, time and attendance, system interfaces, leave records, internal controls and testing.

Why audit payroll before planning implementation?

The transition will rely on existing employee records, payroll data and leave balances. An audit helps identify inaccurate calculations, incomplete data and configuration issues before they are carried into the future environment.

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Sources

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Employment Leave Act Readiness: Audit Payroll Before Implementation

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