Aspiring Law business spotlight: Changes Coming to the Holidays Act 2003 – What Does This Mean for Your Business?

The Government has confirmed that changes are on the way for the Holidays Act 2003, and while draft legislation won’t be released until early 2026, it’s important for employers to start preparing now. These changes will have a direct impact on how you manage pay, leave, and entitlements for your staff — particularly if you employ casual, waged, or commission-based workers.

Here’s what you need to know so far:

Key Changes Announced

🔺 Overtime Hours
For waged workers with fixed hours in their contracts, any additional hours worked above their contracted hours will no longer be factored into the annual leave wage calculation. Instead, these hours will attract a 12.5 additional entitlement, paid in the relevant pay period.

🔺 Casual Employees
Currently, casual employees receive an 8% entitlement. Under the new rules, this will increase to 12.5, reflecting the fact that casual employees don’t have sick leave entitlements.

🔺 Commission and Bonuses
For employees on a commission or bonus structure, these payments will no longer form part of leave entitlement calculations. Annual leave will be calculated on base salary only.

🔺 Sick Leave Accrual
Employees will now begin accruing sick leave from the start of their employment, rather than waiting six months for an entitlement. However, part-time employees will accrue sick leave relative to the hours worked, rather than receiving a blanket entitlement of 10 days.

Timeline for Change

While these changes have already been announced, the draft legislation is expected in early 2026. At that point, it will be open for public submissions, meaning there’s still opportunity for businesses and employees to provide feedback before the law is finalised.

What Should Employers Do Now?

• Stay informed: Keep an eye on updates and guidance from MBIE and industry associations.

• Review contracts: Look at how your employment agreements currently handle overtime, casual loading, and commission-based pay.

• Plan for adjustments: These changes may affect payroll systems, HR processes, and budgeting for staff costs.

• Seek advice: Talk to an employment law professional if you’re unsure how these changes may affect your business.