The Employment Leave Bill is making its way through Parliament and, if passed, will replace the Holidays Act 2003. The emphasis on simplifying the current requirements is welcomed. The current Act has been a compliance headache for years, and overall we consider that the proposed changes are a genuine step in the right direction.
One of the most significant shifts is moving leave to an hours-based system. Annual and sick leave would be calculated against an employee’s standard hours rather than weeks worked. For hospitality businesses — where variable hours, shift work, and changing rosters are part of the job — this makes far more sense than the current system. Hours-based accrual provides a transparent and logical link between hours worked and leave earned. This reflects the principle that leave entitlements should align as closely as possible with the hours an employee actually works.
The move to pro-rata sick leave is is also long overdue. Sick leave accruing in proportion to hours worked is a fair and logical outcome that benefits both employers and employees. It ensures entitlements are aligned with actual working patterns. Employees accrue leave that reflects their working pattern, and employers are not exposed to disproportionate sick leave liabilities relative to the hours an employee actually works.
The Otherwise Working Day test
Working out whether a public holiday falls on a day someone would “otherwise” have worked has always been one of the trickier parts of the current Act. This is particularly true for staff on variable rosters. The Bill proposes a more straightforward test: a day counts as an otherwise working day if the employee worked, or was on leave, for at least 50% of that same day of the week over the preceding 13 weeks. It’s a clearer benchmark, and a practical improvement on what we have now.
The Leave Compensation Payment
For casual hours or ‘additional’ hours worked, the Bill proposes a Leave Compensation Payment (LCP). This will be a 12.5% payment on top of the ordinary hourly rate for those hours. The idea is to simplify things, however we have some concerns about this payment in practice. In hospitality staff may regularly work above their contracted guaranteed hours. The boundary between “standard hours” and “additional hours” isn’t always obvious. There’s a real risk that a large chunk of hours in our sector end up caught by the LCP in a way that wasn’t intended. We’ve asked for clearer guidance on how standard hours should be defined for variable-hours businesses.
Areas for refinement
We support the overall direction of the Bill, but there are some areas that need refinement before it works well for hospitality. On sick leave, we think there should still be a qualifying period before leave can be taken — in line with the current six-month threshold — even if accrual starts from day one. Immediate access to sick leave adds real cost and can create some unintended incentives, especially early in a new employment relationship.
We’ve also questioned whether the extension of bereavement leave and family violence leave entitlements to casual workers. A casual worker who has agreed to work a shift has not entered into the same kind of ongoing employment commitment as a permanent worker, and we do not consider it appropriate for the same leave framework to apply in full to casual arrangements.
Next steps
Once passed, there’s a 24-month transition period before the new rules come into force. We support this given how much will need to change in terms of contracts, payroll systems, and processes. Hospitality employment is complex enough that our sector needs practical, industry-specific guidance developed with us. The transition will give us time to do that.
We will keep members up to date as the Bill progresses through Parliament.
You can read our full submission here.
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