The Government has confirmed plans to repeal the Holidays Act 2003 and replace it with a new Employment Leave Act. Minister Brooke van Velden says the aim is to give both employers and employees greater certainty, simpler rules and a fairer system. After years of confusion, compliance challenges and costly remediation, the changes are designed to simplify leave entitlements and improve transparency and consistency.

However, some of the changes will provide enhanced entitlements to employees, which may come at an increased cost to employers. The Government intends to pass the new law by the end of its current term with a 24-month implementation period to allow employers time to transition.

Key changes

Here are the major reforms proposed:

• Hours based leave accrual: Sick and annual leave will be accrued based on hours worked rather than by “days” and employees will be able to use leave in hours.
• Pro rata sick leave: Sick leave entitlements will be proportionate to hours worked (rather than fixed for all employees).
• Casual workers / leave compensation payment: Casual workers will receive a “Leave Compensation Payment” of 12.5% per hour worked instead of accruing annual and sick leave.
• Overtime / leave compensation payment: Employees will be entitled to a 12.5% Leave Compensation Payment for each hour worked beyond their contracted hours.
• Family violence and bereavement leave from day one: Employees will be entitled to family violence and bereavement leave from day one (instead of after six months)
• Annual leave after parental leave: Parents coming back from parental leave will get full pay for annual leave accrued while on parental leave (rather than the current lower rate)
• Mandatory pay statements: Employers will be required to provide clear pay statements each pay period, itemising pay and leave in a way that's transparent and easy to understand.
• Cashing up annual leave: Employees will be able to “cash up”25% of their annual leave balance by agreement with the employer (instead of being limited to one week per year)

What employers should do now

• Audit your current leave balances: ensure your business is compliant with the Holidays Act 2003 so that leave balances will be correct at the time of transfer to the new law.
• Budget: factor in any increased costs from the new law to long term budgets (expected to apply from 2028).
• Consult: with your payroll and HR software providers about how they will assist with the transitional period.

We're here to help employers adapt

At Anthony Harper, we have been following the Holidays Act reform closely. We believe that with the right preparation, businesses can turn what might seem like complex change into an opportunity: updating systems, clarifying policies and building stronger trust with employees. We are ready to advise on:

• Assessing your current leave policy and payroll systems
• Modelling cost impacts under the new rules
• Drafting or revising employment agreements and policies
• Training management / HR staff to ensure compliance

If you are a business or decision-maker and want help understanding how the new Employment Leave Act might affect you, whether through increased costs, compliance obligations or policy changes, our Employment team can help you plan and prepare for the changes. Get in touch with Anne Wilson or Rebecca White to discuss your options.