On 24 September 2025, Workplace Relations and Safety Minister Brooke van Velden revealed that Cabinet agreed to repeal and replace the Holidays Act 2003 with a new Employment Leave Act.  

 The changes are expected to affect around 2.2 million workers with contracted hours, as well as tens of thousands of casual and part-time employees. There will be a 24-month implementation period after the Bill is passed to allow for a ‘smooth transition’ for employers and payroll providers, however, here is a summary of the key changes to look out for. 

Earning and Taking Leave 

Annual Leave 

  • Current Legislation: The way annual leave is currently calculated follows a lump-sum model, requiring “continuous employment” to qualify. An employee can request to cash up to one week of their annual leave entitlement every 12 months.   
  • New Legislation: Leave will now accrue at a rate of 0.0769 hours for every hour worked, and the requirement for “continuous employment” to qualify for annual leave is being removed. The new system will also allow employees to “bank” leave hours with no balance adjustment if your contracted hours change. Finally, employees will also now have the option to request to cash up to 25% of their total annual leave balance every 12 months. 

 Sick Leave 

  • Current Legislation: Under the current legislation, new employees must wait six months before they are entitled to sick leave. This is then capped at 10 days of leave per year.   
  • New Legislation: The upcoming changes also aim to introduce more straightforward and accessible sick leave entitlements. Following the implementation of the new legislation, sick leave will begin to accrue from the first day of employment at a rate of 0.0385 hours for every hour worked, with an annual cap of 160 hours. This means new employees will no longer have to wait to start building their sick leave balance and can earn/take sick leave in hours against contracted hours and any hours a worker has accepted. Finally, the previous “Otherwise Working Day” (OWD) test is being removed (an otherwise working day is a day that an employee would have been working had the day not been a public holiday, sick leave, bereavement leave, family violence leave, annual holiday or alternative holiday) and sick leave may be taken in hours against contracted hours and any hours a worker has accepted. 

 Bereavement and Family Violence Leave 

  • Current Legislation: Current laws mean an employee is only eligible for bereavement and family violence leave after 6 months and these are taken as full days of entitlement. 
  • New Legislation: These leave entitlements will now be based on days rather than a fixed period after six months of employment. The changes will also allow for part days of entitlement to be taken on the same day as sick leave, offering more options for managing time off. 

 Public Holiday 

  • Current Legislation: Current laws mean that entitlements to paid days off work and alternative holidays apply on OWD. Employers and employees must currently consider a range of factors, but this is overall unclear from the legislation.  
  • New Legislation: A new test will be used to determine if a public holiday is an OWD, based on whether the employee has worked 50% of the corresponding days of the week. 

 Alternative Holidays 

  • Current Legislation: Currently, a whole alternative holiday day is provided when a worker works on a public holiday that is an OWD, regardless of the time actually worked on that day. Alternative holidays must also be taken on another OWD and can be cashed in after 12 months. 
  • New Legislation: The new changes mean alternative holidays will accrue at a rate of 1:1 for every hour worked, or required to work if called, on a public holiday. Alternative holidays will be able to be taken on any day that could have been worked under the employment agreement and can be cashed up at any time.   

 

Leave Payments and Compensation 

Leave Payments 

  • Current Legislation: Under the current legislation, leave pay is calculated based on the greater of an employee’s average weekly earnings or their ordinary weekly pay. When an employee takes annual leave soon after parental or volunteer leave, it may be paid at a lower rate.   
  • New Legislation: Following the changes, all leave pay will be based on an hourly rate. The aim of this change is to ensure that payment accurately reflects the employee’s base wage for the day of leave. Furthermore, the new legislation will ensure that annual leave taken after parental and volunteer leave will be paid as normal. 

 Leave Compensation Payments 

  • Current Legislation: Under the current legislation employers and workers can agree to use ‘pay as you go’ (8% of gross earnings) instead of providing paid annual leave if work is intermittent or irregular or for a fixed term of less than 12 months.  
  • New Legislation: The new legislation will mean leave compensation for casual workers, and for additional hours worked by other employees, will be paid at a rate of 12.5% for all hours worked. Additionally, fixed-term workers will now accrue both annual and sick leave from their first day. 

 

If you have any questions about how these changes may affect your work entitlements, the first step in getting support is to talk with a lawyer from Frontline Law about your situation and see what options we can offer you. Contact Frontline Law for a free initial consultation.

*The information in this blog post is general in nature and is not legal advice. If you need advice, you should contact us about your specific situation.