Proposed Employment Leave Act set for 2026

A major update: the Government has announced policy decisions to replace the current Holidays Act 2003 with a new employment‐leave framework. The key changes include:

• Leave (annual and sick) will accrue continuously in hours from day one, rather than being provided as full weeks or days, respectively.

• Employees will be able to use their leave hours to take any part of a day off work.

• Sick leave will be earned in direct proportion to contracted hours (rather than “everyone gets the same number of days” approach).

• For casual employees and hours worked over and above contracted hours (unless covered by salary), there will be a 12.5% upfront leave compensation payment instead of accrual of annual/sick leave.

• The way leave is paid will also change: the same hourly leave pay rate for all types of leave, based on the worker’s base wage for the day of leave; fixed allowances will continue to be paid in full during leave.

• Alternative holidays and public-holiday entitlement tests are also being reworked, moving to hours‐based accrual and a clearer test of “would have worked on this day” for public-holiday eligibility.

What it means for us:

• This is a big change to how leave entitlements are managed and calculated — we may need to revisit our payroll systems, leave‐tracking and policies.

• For casual and variable‐hour employees, the 12.5% compensation option may change how we classify and pay for their hours.

• Supervisors, payroll/systems administrators and HR will need training on how these new leave rules will operate.

• The “any part of a day” flexibility may give employees more choice and flexibility — this may require us to think about how we schedule, communicate and manage partial‐day leave.

What we can do:

• Start a review of our leave accrual, tracking and payroll systems: how they currently calculate leave, how they will need to adapt to hours-based accrual from day one.

• Prepare for training of payroll/HR/admin staff so they understand the new rules when they come into force.

• Communicate the coming changes to the team early: even though the legislation is not yet in place, letting people know this is coming will help with change management.

• Consider how our staffing/rostering policies handle partial-day leave requests and variable‐hour employee types; we may need to update our internal leave policies to reflect the new approach.

Key Dates

Until this Bill has passed the current Holidays Act continues. 

It is likely there will be a two year transisition period once the Bill has passed, and longer for some industries.