The impact of the Employment Leave Act for employment agreement choices

The new Employment Leave Act may not come into force until August 2028; however, there are some significant changes that may well impact which contract you use, in order to future-proof yourself for that change.

Key definitions

The act introduces a number of new definitions, which I will lay out as that helps to understand the rest of the description:

Standard hour – any hours the Employment Agreement specifies they are required to work and be paid for

Additional hours – for employees who have standard hours, the additional hours are those that the employer is not required to provide, and the employee doesn’t have to work, i.e. Overtime, or in the case of Lower Guaranteed hours agreements, the hours that are not guaranteed

Casual hours – for employees who the employer does not have to provide any hours and the employee does not have to accept any hours Leave compensation payment – an allowance of 12.5% paid over and above the hourly rate for any additional hours or Casual hours, to compensate for the fact that additional hours and Casual hours don’t attract holiday pay and sick pay

Fixed allowance – this is an allowance that is payable irrespective of whether the employee is on leave or not

Non-fixed allowance – an allowance which is only payable in certain circumstances e.g. if you work a night shift you will get paid $XX allowance.

So, what are the key changes in summary?

• Entitlement to Sick leave, bereavement leave, and family violence leave will be from day 1 (no 6 months stand down)
• Sick leave will now accrue at the rate of 0.0386 for each standard hour. I.e. sick leave will be pro-rata rather than a fixed 10 days irrespective of the number of days you work, but still accrues up to a maximum of 160 hours. However, it someone is working part-time, it will take them much longer to accrue the 160 hours of sick leave than someone working full-time
• Annual leave accrues at a rate of 0.0769 per standard hour
• Commission and non-fixed allowances do NOT attract either leave accruals or leave compensation payments

Low Guaranteed hours contracts.

They legally need to:

• Include an availability provision, i.e. when you need them to be available to you. Have genuine business reasons for including that availability provision.
• Give the ability for the employee to refuse work – i.e. you can’t require the employee to be available 24/7 in case you have a shift for them, so, in return they must have the right to refuse offered work without penalty.
• Include details about the compensation for that availability, i.e. how much they will be paid for cancelled shifts, how much notice you will give of cancelled shifts etc.

Provided you have genuine business reasons (seasonal variations, weather impact etc) and you give reasonable notice of cancellation of shifts or pay them a minimum level if you don’t meet those notice requirements, then you can set the guaranteed number of hours as low as you need.

Under the new Employment Leave Act (which doesn’t come into force until Aug 2028) annual leave and sick leave will only be paid for the standard (Guaranteed) hours, but the Leave Compensation Payment will be paid at a rate of 12.5% on any additional hours over and above the standard hours.

Independent Contractors

In February 2026 the Employment Relations Amendment Act introduced a new gateway test, which means that Contractor agreements:

• Must be in writing,
• Workers cannot be restricted from working for others.
• They are not required to be available for specific times or days unless agreed and may subcontract work.
• Employers cannot terminate contracts for not accepting additional tasks.

However, if the above rules are not met, then the courts revert back to the old tests of justification.

Leave payment for Casuals

The current Holidays Act (which remains in force until 6th August 2028) states that, if an employee “works for the employer on a basis that is so intermittent or irregular that it is impracticable for the employer to provide the employee with 4 weeks’ annual holidays” then you can pay them the 8% uplift with their pay. However, it then goes on to state that “If an employer has incorrectly paid annual holiday pay with an employee’s pay in circumstances where subsection (1) does not apply and the employee’s employment has continued for 12 months or more, then, despite those payments, the employee becomes entitled to annual holidays in accordance with section 16 and paid in accordance with this subpart”. I.e. they can double dip and get 4 weeks paid annual leave irrespective of what you have already paid them.

The new Employment Leave Act introduces a new entitlement of Leave Compensation payment of 12.5% for casual workers (i.e. up from the current 8%).