The Advocate | Issue 376 | August 2026

The Employment Leave Act 2026 (the “ Act ”) was passed into law on 6 August 2026, and will come into force in two years’ time (6 August 2028). The Act is expected to have a significant impact on employee leave entitlements by simplifying the way that leave is earned, taken and paid. It will replace the complex Holidays Act 2003 framework with a clearer hours-based system for annual and sick leave, as well as enacting a number of other changes to the current leave system. 

Below we outline some of the key concepts and changes introduced by the new Act. However, we note that the below is not an exhaustive explanation of the new law. We recommend seeking specific advice on any particular questions you may have, as each situation will be different. 

Key Concepts under the Act 

Distinction between hours of work

The new Act introduces three types of hours as the framework for accruing and paying leave:

Standard hours : the hours an employee is required to work under their employment agreement and that an employer must pay them for. 

Employees who do not have a set number of standard hours (e.g. salaried employees), set days of the week they work, or set hours each day, must agree with their employer to a notional roster at the time the employment agreement is entered into. Alternatively, employees and employers can agree a methodology to determine a notional roster. The notional roster will be used to determine annual and sick leave accrual, and when leave can be taken. The notional roster will not be used to determine entitlement to public holidays or alternative leave. There will be an obligation to ensure any notional roster agreed is kept up to date. 

Additional hours : this relates to an employee who works standard hours. Additional hours means the hours that an employer is not required to make available and that the employee has the right to refuse, and that the employee works and must be paid for by way of an additional payment, (for example, a waged employee would be required to be paid their hourly rate for additional hours worked), or any hours that an employee works under an availability provision. For each additional hour worked, an employee will be entitled to a ‘ leave compensation payment’ (discussed further below). 

Casual hours : the hours an employee works if under their employment agreement the employer is not required to offer work to the employee and the employee is not required to accept any work that is offered. For each casual hour of work, an employee will be entitled to a ‘ leave compensation payment ’ (discussed further below).

Calculation of Payment for Leave (all types of leave)

All leave will be paid at the “ leave hourly rate ”. For waged employees, this will be the lowest hourly rate payable under the employment agreement. For salaried employees, it will be the amount of salary attributable to one standard hour of work (for example, this may be calculated by dividing annual salary by the number of annual standard hours). 

The calculation for the leave hourly rate will not include the leave compensation payment, allowances that are not “ fixed ” allowances, or any productivity or incentive-based payments (including commission). If the leave hourly rate is below the minimum wage, then the minimum wage will be used. 

Fixed allowances are defined under the Act as “ a fixed amount that must be paid in relation to a specified period or certain circumstances and the employee is entitled to receive despite the period of leave or public holiday”. Fixed allowances do not include allowances that would be paid only if certain circumstances occur (for example, an allowance paid for working in the rain); allowances an employee is not entitled to receive if they do not work; or if the allowance is to reimburse for expenses that the employee would not incur if they did not work. 

Where an employee is paid partially or wholly by commission, then the leave payment rate will be the greater of the leave hourly rate (i.e. the lowest hourly rate payable under the employment agreement), or the minimum wage. 

Where an employee is paid a “ piece rate ” (e.g. for the number of buckets of apples picked per day), payment for all types of leave will be calculated at an average hourly rate for piece work, or the minimum hourly rate of pay (minimum wage), whichever is greater. 

Key Considerations for Specific Employment Arrangements

Permanent Employees 

The key impact on permanent employees will be where they work part-time hours, or where a permanent employee varies their hours, as leave will accrue and bank based on hours actually worked. 

Casual employees 

As above, casual employees will be entitled to be paid a leave compensation payment of 12.5% of their ordinary hourly wage rate with their pay, rather than accruing annual leave and sick leave for every hour worked as for other employees under the new Act. 

Where a casual employee has been offered and agreed to work in a work roster, they will be entitled to take bereavement and family violence leave (accessible from the first day of employment). 

Fixed term employees

Currently, an employer and employee can agree that an employee will be paid annual holidays with their pay (i.e. ‘ pay-as-you-go ’ annual holidays). Under the new Act, a fixed term employee with standard hours will accrue sick and annual leave. Therefore, the option of ‘ pay-as-you-go’ for fixed term employees will be removed. 

Other Changes to Note

Payment of annual leave and alternative leave on termination 

On termination of employment, employees will be entitled to be paid for each hour of annual leave or alternative leave that the employee has not taken or cashed up, at the leave hourly rate.

Employees will not be entitled to be paid for any public holidays that fall within the period of entitled leave being paid out on termination, as they are currently entitled to be paid.

Employees returning from parental leave 

Currently, where an employee returns from parental leave, the value of their leave is based on their earnings for the previous 12 months, rather than the greater of ordinary weekly pay and average weekly earnings. This results in payments being calculated at a lower amount where an employee has taken an extended period off work and therefore has lower earnings. 

The Act provides that employees taking parental leave will continue to earn leave during parental leave, and when annual leave is taken after an employee returns to work from parental leave, the payment will be calculated as it normally would be under the Act. 

Removing the requirement to pay out annual leave at the beginning of a closedown

Under section 34 of the Holidays Act 2003, where a closedown occurs and an employee is not entitled to annual holidays (i.e. has not yet completed 12 months’ continuous service), an employer must pay an employee 8% of their gross earnings since the commencement of employment or since the employee last became entitled to annual holidays, less any amount paid as annual holidays in advance or as pay-as-you-go holidays. The Act removes this requirement. 

Preparing for Change 

As noted above, the new law will not come into force until 6 August 2028.

The Act sets out a method for converting weeks/days-based entitlements to hours. 

From the date the new law comes into force, employers will have 1 year to make any required changes to employment agreements. If one year after commencement an agreement has not been amended and conflicts with the new law, the intention is that the new minimum statutory entitlements will override any employment agreement provisions that are inconsistent (i.e. the minimum entitlements provided under the Act will prevail).