Alex is Sprintlaw's co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
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If you employ staff (or you’re about to hire your first team member), you’ve probably had someone ask about “long service leave” at some point.
It’s a common question for New Zealand employers because people often hear about long service leave from overseas (especially Australia) or from older workplace practices - and then assume there must be a standard entitlement here too.
The tricky part is that long service leave in New Zealand isn’t a “one size fits all” statutory entitlement in the way annual holidays and sick leave are. But that doesn’t mean you can ignore it.
If you promise it (even informally), write it into an agreement, or have an established custom of offering it, you can create real obligations that affect your payroll, rostering, and employee relations.
Note: This article is general information only and isn’t legal advice. Because entitlements can vary depending on your employment agreements, collective agreements and workplace arrangements, it’s worth getting advice for your specific situation.
What Is Long Service Leave (And Why Do Employees Ask About It)?
“Long service leave” usually means paid time off awarded after an employee has stayed with the same employer for a long period (for example, 5 years, 10 years, 15 years, and so on).
It’s typically designed as a retention and recognition benefit. Depending on the workplace, long service leave might be:
- a set block of extra paid leave (for example, 1–2 weeks after 10 years);
- an extra paid day (or days) each year after reaching a service milestone;
- a sabbatical-style break;
- or a “cashable” benefit (less common, and generally something you’d want documented carefully).
Employees often ask about long service leave because:
- they’ve had it in previous roles (especially in larger organisations or specific industries);
- they’ve moved from overseas where it’s more standardised;
- they’re comparing offers (so it becomes part of recruitment and retention);
- they assume it’s “the next entitlement” after annual leave and sick leave under New Zealand law.
From an employer perspective, the key point is simple: if long service leave is on the table, you want it clearly defined in writing so you can manage cost, coverage, and expectations.
Is Long Service Leave A Legal Entitlement In New Zealand?
In most cases, there is no general statutory entitlement to long service leave in New Zealand.
In other words, unlike annual holidays and sick leave (which are minimum entitlements under the Holidays Act 2003), long service leave is usually:
- a contractual benefit (something you choose to offer, and document in an employment agreement);
- a policy-based benefit (set out in a handbook or policy); or
- a benefit arising from collective agreements, industry arrangements or historical practices (more on this below).
This is why searches for long service leave in New Zealand can be confusing. People often expect a universal rule, but the real answer is: it depends on what applies in your workplace.
Don’t Confuse Long Service Leave With Standard Leave Entitlements
Even though long service leave isn’t generally mandated, you still need to meet the standard minimum entitlements, such as:
- annual holidays (at least 4 weeks after 12 months’ continuous employment);
- public holidays (if the day would otherwise be a working day);
- sick leave (minimum entitlement after 6 months, with ongoing accrual rules);
- bereavement leave and family violence leave (where applicable).
If you’re documenting any “extra” leave - including long service leave - it should sit neatly alongside these minimum entitlements in your Employment Contract, without creating confusion about what’s statutory versus discretionary.
When Might Long Service Leave Still Apply To Your Business?
Even though long service leave isn’t typically required by legislation, you might still need to provide it if it arises through one of the pathways below.
1) It’s Written Into Employment Agreements
If you offer long service leave in your employment agreements, it becomes a binding contractual entitlement.
This means the “rules” aren’t what an employee assumes they are - the rules are what the contract says (as long as it’s lawful).
For example, your agreement might specify:
- eligibility criteria (continuous service, minimum hours, performance requirements, etc.);
- how much leave is awarded and when;
- whether it accrues progressively or triggers at milestones;
- whether the employee must give notice and get approval for timing;
- what happens if employment ends before the milestone date.
Because this becomes a real cost and rostering consideration, it’s worth getting the wording right from day one.
2) It’s Part Of A Workplace Policy Or Handbook
Some businesses don’t put long service leave directly in each employment agreement and instead set it out in a policy.
This can work well - but you need to be careful about how the policy is drafted and incorporated into the employment relationship.
As a general rule, your policies should be consistent, easy to apply, and clear about whether they are:
- contractual (binding promises), or
- guidelines the business can change (with notice and consultation where appropriate).
If you’re building out your internal documents, it’s common to include leave-related benefits in a broader Workplace Policy framework so expectations are consistent across the team.
3) Collective Agreements And Industry Arrangements
In some sectors, long service leave (or an equivalent “service leave” benefit) may be set out in a collective agreement or reflect established industry arrangements.
If your employees are covered by a collective agreement, you’ll need to check what it says about:
- eligibility and service thresholds;
- how the entitlement is calculated;
- how and when the leave can be taken; and
- what happens if employment ends or the business changes hands.
This is one of the key reasons there isn’t a single rule for long service leave across New Zealand workplaces - the enforceable entitlement (if any) often comes back to the specific agreement or arrangement that applies.
4) Custom And Practice (Be Careful With “We Usually Do This”)
Sometimes long service leave becomes an expectation because “that’s what we’ve always done” - even if it’s not written down.
If, for example, you’ve consistently granted an extra week off after 10 years and communicated it as a reward (especially in writing, like emails or offer letters), employees may argue it’s become a term of employment through custom and practice.
This is where employers can get caught out: you may think it’s discretionary, but your pattern of behaviour suggests it’s an entitlement.
If you’ve been operating informally, it’s often better to:
- formalise the benefit clearly (including limits and eligibility), or
- reset expectations carefully (usually with advice, and with proper communication).
How To Offer Long Service Leave The Right Way (Without Creating a Headache Later)
If you want to offer long service leave as a retention tool, you absolutely can - and for many small businesses it’s a great way to reward loyalty.
The goal is to do it in a way that’s clear, consistent, and financially predictable.
Decide What You’re Actually Offering
Before you draft anything, get specific about the commercial settings. For example:
- Eligibility: Will it apply to all employees, or only full-time/part-time? What about long-term casuals?
- Service definition: What counts as “continuous service”? What happens with approved unpaid leave, parental leave, secondments, or role changes?
- Milestones: Is it 5 years, 10 years, or staggered (e.g. 1 week at 7 years, 2 weeks at 10 years)?
- Timing and approval: Can the employee take it anytime, or only at quieter periods? Does it need to be taken within a certain window?
- Interaction with other leave: Can it be taken with annual holidays? Can it be paid out?
The more detail you decide upfront, the less room there is for disagreement later.
Put It In Writing (And Keep It Consistent)
Long service leave promises should be documented either:
- in the employment agreement itself; and/or
- in a policy that is clearly referenced and applied consistently.
For most small businesses, the simplest approach is to include a short, clear clause in the employment agreement and then back it up with policy detail where needed.
This also keeps you aligned with your wider employment documentation - including your standard Employment Contract terms around hours, remuneration, and leave processes.
Budget For It Like A Real Liability
Even if long service leave is “optional” in the sense that you choose to offer it, once it’s promised it becomes a cost you should plan for.
Practical steps that help include:
- keeping a simple register of start dates and upcoming milestones;
- considering whether you want to cap accumulation;
- thinking about coverage requirements (especially if key staff might take leave around the same time);
- factoring it into pricing if you run a service business (because time off is time you still need to pay for).
If you’re not sure how to structure it, it’s usually worth getting advice before you announce it to the team - it’s much easier to set expectations early than renegotiate later.
What Happens If Employment Ends Or The Business Changes Hands?
This is where employers often feel the most uncertain: if long service leave exists in your workplace, how does it work when someone resigns, you terminate their employment, or you sell the business?
The answer depends heavily on what your agreements say (including any collective agreement), and on how the employment relationship ends - but there are some common risk areas you should plan for.
Resignation, Termination, And “Part-Completed” Service
If an employee leaves before they hit the milestone, do they get anything?
In New Zealand, there isn’t a universal rule because long service leave is usually contractual (or set by policy, collective agreement, or practice). That means:
- if your contract says “no entitlement unless the milestone is reached”, that is often what applies; but
- if your wording suggests it accrues progressively, the employee may argue for a pro-rata payment; and
- if your communications have been inconsistent, that can create disputes.
From a risk management perspective, the cleanest option is to state clearly whether long service leave:
- accrues over time, or
- only becomes available once a milestone is reached, and otherwise lapses.
Also keep in mind that any termination process needs to be handled fairly and lawfully (including consultation and good faith obligations under the Employment Relations Act 2000), regardless of long service leave.
Redundancy Scenarios
If you restructure, reduce headcount, or disestablish a role, long service leave can become part of the overall “what is owed?” conversation.
Redundancy in New Zealand is a technical area because you need both:
- a genuine business reason, and
- a fair process.
If you’re planning changes that could affect staff, it’s a good idea to get guidance early - including on what you owe under the employment agreement, any collective agreement, and what you may have promised through policies or practice. This is exactly the kind of situation where Redundancy Advice can save you time and reduce the risk of a personal grievance.
Selling The Business Or Changing Ownership
Long service leave questions often come up during a sale, because buyers want to understand the workforce liabilities they’re inheriting.
If you’re selling your business, you’ll need to think about:
- what employee entitlements transfer (or whether the buyer will offer new employment agreements);
- whether long service leave is a contractual entitlement, applies under a collective agreement, or is genuinely discretionary;
- how you’ve historically applied it (custom and practice risk);
- how staff will be consulted and informed (to meet good faith obligations).
This is particularly important when you’re negotiating your sale documents and due diligence, because misrepresenting employee entitlements can cause disputes after settlement.
If you’re already in that territory, issues around employee rights and changing company ownership can directly affect how you structure the transaction and what you disclose.
Settlement Of Disputes
If a disagreement arises (for example, an employee claims they were promised long service leave, or that it accrued and should be paid out), it may end up being resolved through negotiation.
In some cases, businesses choose to settle disputes commercially to avoid time and cost, usually documenting the outcome properly so it’s final and enforceable. Where appropriate, that can include a Deed of Settlement.
The main takeaway is: long service leave is rarely the only issue in a dispute - it’s often tied to wider communication and process problems, so having clean documentation from the start makes a big difference.
Key Takeaways
- Long service leave in New Zealand is not usually a standard legal entitlement like annual holidays or sick leave - it’s typically offered by agreement, policy, a collective agreement, or established practice.
- If you include long service leave in an employment agreement (or consistently apply it in practice), it can become a binding obligation that affects cost, rostering, and employee expectations.
- The safest approach is to define long service leave clearly in writing, including eligibility, milestones, approval rules, and what happens if employment ends before a milestone is reached.
- Be careful with informal promises - “we usually do this” can create custom and practice risk, especially if you’ve applied the benefit consistently over time.
- Long service leave can become a bigger issue during redundancy, termination, or a business sale, so it’s worth getting advice early if your workforce or ownership structure is changing.
- If you want to offer long service leave as a retention tool, plan for it like a real liability and make sure it fits cleanly alongside your Holidays Act entitlements and other leave policies.
If you’d like help setting up long service leave properly (or reviewing what your current contracts and policies already say), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
