Employment Legislation Update: Proposed Employment Leave Act 2025
In arguably the biggest change to employment legislation in recent decades, the Government has agreed to repeal and replace the Holidays Act 2003 with a proposed Employment Leave Act that aims to be a clearer, more workable system that reduces errors and compliance costs.
The Minister has indicated that she intends to have the Proposed Act passed before the next election (with draft legislation to be released in the first quarter of 2026).
The Government proposes a 24-month implementation period if the Proposed Act is enacted (with the schooling sector to have up to 10 years). During this period, existing leave balances for standard-hours employees would be converted to hours, and casual employees’ annual and alternative holiday balances would be cashed up.
Some of the key proposed changes include the following:
A shift to hours-based accrual for annual and sick leave
- Workers will earn annual leave and sick leave from day one in direct proportion to contracted hours of work. Annual leave accrues at a rate of 0.0769 hours (4/52) per “contracted” hour (providing the equivalent of four weeks’ leave for workers whose contracted hours do not change).
A shift to pro rata sick leave
- Sick leave accrues at a rate of 0.0385 hours (2/52) of sick leave per “contracted” hour (providing the equivalent of 10 days for a worker who works five days a week and the same hours every day).
Leave Compensation Payment for casual employees
- Casual employees will generally see an increase to their pay by receiving an upfront payment of 12.5% for each hour worked, instead of accruing annual and sick leave or receiving the current 8% Pay-As-You-Go payment.
Leave Compensation Payment for additional hours worked
- Any hours worked on top of contracted hours will not accrue annual or sick leave but workers will receive an upfront payment of 12.5% for each additional hour worked.
Family violence and bereavement leave
- Employees will now be able to access bereavement leave and family violence leave from the first day of employment.
Returning from parental leave
- New parents will now receive their full pay for annual leave when they return from parental leave, a major shift from the status quo.
Mandatory pay statements
- Employers will now 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
- Where a worker has a large annual leave balance there will be more flexibility to cash it up. Currently workers can only request to cash up one week in each entitlement year. Now they will be able to cash up 25% of their total annual leave balance each year. Employers who agree to cashing up will benefit from reduced leave liability.
We Can Help
Business Canterbury will keep members updated in its passage through Parliament and be running a series of briefings and workshops to inform members of the detail and obligations of the new Act, starting with a special Holidays Act Briefing with Minister van Velden Thursday 2 October at 12.00pm.
Our HR Advisory team is also on hand to provide practical advice, tailored guidance, and the tools you need to navigate these changes with confidence.