The Employment Leave Bill passed its final reading in Parliament, replacing the heavily criticised Holidays Act 2003.
Workers across the country will now earn annual and sick leave from their very first day on the job.
Instead of waiting 12 months for four weeks of annual leave or six months for sick leave, accrual is now calculated in hours based on time worked.
Annual leave will build at a minimum rate of 0.0769 hours per hour worked. Sick leave will accrue at 0.0385 hours per hour worked up to a 160-hour cap.
Under the new laws, part-time workers will earn sick leave proportionally to their hours rather than receiving the flat 10 days granted to full-time staff.
Casual workers will receive a 12.5 percent pay-as-you-go compensation rate instead of accruing annual and sick leave.
Workplace Relations and Safety Minister Brooke van Velden said the reform brings much-needed clarity.
In a Beehive press release, van Velden said, "We've already had decades of overcomplicated legislation so now that we've finally settled on a simpler path forward, I hope it will be enduring to give businesses and workers the simplicity and stability they need".
The Labour Party opposed the legislation during its passage through Parliament, arguing that those who could least afford it would lose out under the new rules.
Other key changes include allowing employees to cash up to 25% of their annual leave balance and granting all workers access to bereavement and family violence leave from day one.
The new rules also remove the holiday pay penalty for parents returning from parental leave.
Employers and payroll providers have a 24-month implementation period to update their systems.
All existing Holidays Act rules will continue to apply until the transition period ends.
