Proposed Changes to the Holidays Act: What You Need to Know

The Government has announced key proposals for a new Employment Leave Bill, which will eventually replace the current Holidays Act 2003.

While the changes are still being finalised and won’t take effect for a while, it’s worth getting familiar with what’s ahead - especially if you employ staff.

The Key Proposed Changes

1. Annual and Sick Leave – from day one

  • Leave will accrue in hours from the start of employment.

  • Annual leave will accrue at 0.0769 hours per hour worked (around 4 weeks per year for full-timers).

  • Sick leave will accrue at 0.0385 hours per hour worked (around 10 days per year).

  • This means part-timers and variable-hour staff will receive entitlements that match the hours they actually work.

2. Casual and Extra Hours

  • The current “pay-as-you-go” 8% rate will be replaced with a 12.5% Leave Compensation Payment (LCP) for casual or irregular hours.

3. Parental Leave

  • Employees will continue to accrue annual leave while on parental leave, and this leave will be paid at their full rate, not a reduced one.

4. Bereavement and Family Violence Leave

  • These will be available from day one and can be taken in hours — making leave more flexible and inclusive.

5. Public Holidays

  • Clearer rules on who qualifies for public holiday entitlements.

  • Alternative holidays will accrue hour-for-hour worked.

6. Cashing Up Leave

  • Employees will be able to cash up to 25% of their annual leave balance each year (up from the current one-week cap).

7. Other Updates

  • Annual closedown periods will require three weeks’ notice.

  • Payslips will need to include more detailed information.

What This Means

For employees:

More flexibility, fairer treatment for part-timers, and earlier access to leave entitlements.

For employers:

Some payroll and system changes ahead — and potentially higher costs if you use casual or variable-hour staff. But in the long run, the goal is simpler, fairer rules that reduce confusion and compliance risks.

What You Can Do Now

Even though these changes are still proposals, it’s a good idea to start preparing:

  • Review your current leave policies, payroll setup, and employment agreements.

  • Model how leave will accrue under an hours-based system.

  • Budget for the new 12.5% Leave Compensation Payment.

  • Keep your team informed so there are no surprises.

  • Stay up to date as the Bill moves through Parliament.

The Timeline

  • Draft Bill expected: Early next year

  • Passage into law: Before the next election (targeted)

  • Implementation: After a 24-month transition period once passed

Need a Hand?

We’ll keep you updated as this progresses — but if you’d like help preparing your business or communicating these changes with your team, get in touch with the People Passion crew.

We’re here to make it simple.

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