On 23 September 2025, the Government announced it will repeal the Holidays Act 2003 and replace it with a new Employment Leave Act. According to Workplace Relations and Safety Minister Brooke van Velden, the reforms are intended to bring simplicity, transparency and fairness to leave entitlements for both employees and employers.
The existing Act has long been criticised for its complexity and inconsistent rules, which have exposed many employers to significant back‑pay liabilities. The Government’s reforms are designed to simplify administration, reduce compliance risks, and make entitlements clearer for workers.
Key Proposed Changes
A summary of the main changes announced by the Government are as follows:
- Annual and sick leave will accrue on an hours‑worked basis, rather than in weeks of service.
- Sick leave will accrue from day one, instead of after six months.
- Casual employees and additional hours worked will attract a 12.5% Leave Compensation Payment (replacing the current 8% loading).
- Employees returning from parental leave will receive their full annual leave pay entitlements.
- Bereavement leave and family violence leave will be available from the first day of employment.
- Employers will be required to provide clear pay statements each pay period showing leave and pay entitlements.
- Employees will be able to cash-up up to 25% of their annual leave balance (with employer agreement).
Risks and Areas to Watch
While the policy direction has been generally well-received, employers should be mindful of the following:
- The precise drafting of the Bill will determine many of the practical details.
- Payroll and HR systems will require updates, testing, and staff training.
- Some employers may face higher costs, particularly in respect of casual employees.
- Employers may need to manage transitional arrangements for existing leave balances.
- The expanded cash‑up provisions may create new employee requests and expectations.
What Employers Should Do Now
- Review your current payroll, rostering and leave policies to identify potential gaps.
- Talk to your payroll provider to confirm they well positioned to support you if the Bill is passed.
- Model the financial impact of the proposed accrual rules on your workforce.
- Review employment agreements and leave policies to ensure readiness.
- Monitor the progress of the Bill and any select committee consultation opportunities.
Conclusion
The potential repeal and replacement of the Holidays Act is a significant proposal that will, if progressed, affect all employers. The shift to hours‑based accruals, new entitlements from day one, and greater transparency will require careful preparation. While many of the reforms should make compliance easier in the long run, the transition period will demand planning.
If you would like tailored advice on how these reforms could affect your business, or if you need assistance updating employment agreements, payroll processes, or workplace policies, please feel free to contact us.
Comparison: Current LAW vs Proposed AMENDMENTS
| Subject | Holidays Act 2003 | Employment Leave Act |
| Annual leave accrual | 4 weeks per year (weeks-based) | Hours-based accrual (hours per hour worked) |
| When sick leave starts | After 6 months (10 days) | From day one, pro rata by hours worked |
| Casual / extra hours | 8% PAYG loading | 12.5% Leave Compensation Payment on hours worked |
| Calculation of leave pay | Multiple methods (average weekly, relevant daily, alternative averages) | Single, streamlined method |
| Parental leave return pay | Annual leave may be reduced | Full leave pay entitlement preserved |
| Bereavement / family violence leave | Service period often required | Available from day one |
| Cashing up leave | One week per year | Up to 25% of balance (with consent) |
| Pay statements | Limited requirements | Mandatory, clear statements each pay period |