Holiday Act reform

In September the Government announced that Cabinet had agreed to repeal and replace the Holidays Act 2003 with a new Employment Leave Act. Workplace Relations and Safety Minister Brooke van Velden stated, “we’re taking care of a broken system that has been too complicated for businesses and workers to navigate effectively”. Some of the key changes proposed are outlined below.
Annual leave and sick leave: Under the proposed new system, from day one both annual leave and sick leave will accrue on an hourly basis in direct proportion to contracted hours of work, and correspondingly, leave will be able to be taken in hours.
Annual leave, instead of being an annual lump sum entitlement, will accrue at 0.0769 per contracted hour worked (equates to 4 weeks per year for full-time employees). When employees agree to work different hours, employers will no longer need to scale annual leave balances to match the new working week, meaning accrued annual leave balances will reflect actual hours worked in the past.
Sick leave will accrue at 0.038 per contracted hour, equivalent to 10 days per year for full-time worker. Part-time employees, currently entitled to the same 10 days as full-time workers, will see a drop in entitlement. For example, a 3-day working week would accrue 6 days sick leave a year.
Fixed term employees on a contract less than 6 months currently receive no sick leave entitlement. Under the new system they will accrue annual and sick leave from the first day.
Annual and sick leave will accrue on paid leave and on parental, volunteer and jury leave, but not on unpaid leave or when on ACC.

Those taking annual leave soon after parental leave will no longer be disadvantaged by the current pay rate calculation based on the previous 12 months, but will be paid at their normal rate.
Leave compensation payments: In place of the complex leave entitlement and pay calculations currently used for variable hours, including waged employees working extra hours and for casual employees, a leave compensation payment of 12.5% of their ordinary hourly wage rate would be paid at the time hours are worked in lieu of accruing annual and sick leave.
Bereavement and family violence leave: All employees will have access to bereavement and family violence leave from day one, as opposed to after 6 months currently, and leave will be able to be taken in part days.
Public holidays and alternative holidays: For employees without contracted days, determining whether a public holiday would have been an “otherwise working day” and thus paid out can be problematic. To simplify this a new test will be applied based on whether the employee has worked 50% or more of the relevant days in previous weeks.
Employees who work on a public holiday that is an otherwise working day, will accrue an alternative-holiday hour for each hour worked; instead of a full day currently regardless of hours worked. Employees who work only some of their contracted hours on a public holiday will receive time and half for the hours they work and leave pay for the unworked hours.
A two-year implementation period from when the Employment Leave Act is passed would be given to enable employers and payroll providers to assimilate the changes. The legislation is expected to be introduced in early 2026 and passed before the election.