Holidays Act Reform: What Employers and Employees Need to Know

A simpler, fairer framework where leave accrues in hours from day one.

The Government is overhauling the Holidays Act 2003, replacing it with a new Employment Leave Bill to address long-standing issues that have made leave entitlements confusing and difficult to manage for both employers and employees.

The current system has long been seen as confusing, inconsistent, and difficult to apply, which has led to widespread non-compliance and costly payroll errors, even among well-intentioned employers. The new Employment Leave Bill introduces a simpler, fairer framework where leave accrues in hours from day one, payments are calculated using a single method, and entitlements are easier to understand and apply as non-standard working weeks are becoming increasingly common.

This change will give workers greater transparency and confidence in their leave balances, while helping employers have certainty, reducing compliance costs and administrative burden.

KEY CHANGES:

Annual & Sick Leave

• Accrual from Day One: Leave will accrue based on contracted hours worked, not after a fixed period.

  • Annual leave: 0.0769 hours per contracted hour.

  • Sick leave: 0.0385 hours per contracted hour (capped at 160 hours).

• Leave accrual during unworked periods: Only during paid leave and specific unpaid leave types (e.g. parental, jury duty).

Leave Usage

• Leave can be taken in hours, not just full days.

• Workers can cash up 25% of their annual leave annually.

• Sick leave can be used for part-days.

Extra Hours & Casual Work

• Waged workers: Extra hours don’t accrue leave but earn a 12.5% leave compensation payment.

• Salaried workers: If worker receives additional wages for extra hours worked, they receive a 12.5% leave compensation payment for those hours.

• Casual workers: Receive 12.5% leave compensation instead of accruing leave.

Fixed-Term Workers

• Must accrue and be able to take leave from day one.

Leave Pay Calculation

• Unified hourly rate based on base wage.

• Bonuses and commissions excluded from leave pay.

Parental Leave

• Workers continue to accrue leave during parental leave.

• Leave taken after returning is paid at the normal rate i.e.. prior to/when working.

Bereavement & Family Violence Leave

• Available from day one.

• Can be taken in part-days.

Public Holidays

• Clearer test for determining if a day is an “otherwise working day”.

• Leave and alternative holiday entitlements based on actual hours worked.

Pay Statements

• Employers must provide clear, itemised pay statements each pay period.

Transition Period

The new legislation is expected to be introduced to Parliament in early 2026, with the aim of being passed in late 2026. Once the new law is passed, there will be a 24-month implementation period to allow employers and payroll providers to adjust systems and processes.

At Buckettlaw, we hope these changes will make leave entitlements fairer, clearer, and easier to manage for both employers and employees. We’re available to assist with reviewing employment agreements and policies, and provide tailored employment legal advice, reach out to us today.