“This Act delivers on the Government’s priority to replace the broken Holidays Act with a leave system which is simple and straightforward, so that employers have confidence in their calculations, and employees have confidence they are being paid correctly.”

Workplace Relations and Safety Minister, Brooke van Velden

The Employment Leave Bill has received Royal Assent, creating the Employment Leave Act. The Act will come into force from August 2028, with the new legislation delivering an updated approach to employment leave entitlement.

The main changes to annual and sick leave entitlements

The Employment Leave Act replaces the existing Holidays Act 2003, ushering in a new set of rules for calculating your employees’ annual and sick leave entitlements.

The key aim is to switch leave entitlement to an hours-based accrual system. This will make it easier for businesses to administer and for employees to understand their leave entitlements.

Here are the key changes you should be aware of:

• Annual and sick leave accrued in hours, in direct proportion to standard hours of work
• Annual, sick, bereavement and family violence leave available from the first day of work
• Use of a single hourly rate for paying leave, across all types of leave
• A new 12.5% Leave Compensation Payment for additional and casual hours, instead of accruing annual leave and sick leave for those hours
• Mandatory pay statements that itemise pay and leave in a way that’s transparent and easy to understand
• Greater flexibility to cash up annual leave, with workers able to cash up 25% of their total annual leave balance each year
• A new Otherwise Working Day test for those who work additional days or do not have a specified pattern of work
• Removal of annual leave payment penalty for those returning from parental leave.

Updating your systems and payroll practices

The new leave entitlement rules will begin from 6 August 2028. This may sound a long way into the future, but it’s important to update your HR processes, payroll processes and payroll systems, so you’re ready for the 2028 deadline.

If you’re concerned about the impact on your HR and payroll systems, come and talk with our team. We can update your systems to ensure you’re fully compliant with the new rules.