Employment Relations Amendment Act 2025

The Act has been passed with Royal Assent given on 6 August 2026. There are several changes, notably in respect of new provisions for notional rosters (where actual hours of work are changeable and it is not possible to predict the days and times of day when the employee’s standard hours may be worked) and changed provisions for employees with multiple roles with the same employer (as is the case in Health). More on these and other changes later.

This article focuses on the transitional provisions which we expect to be very challenging. Once in force, the new system will be simpler going forward, but there will be many bumps in the road, over a considerable period of time, before reaching the promised land.

In essence the Act introduces a leave accrual system with entitlements accruing from day one based on a proportion of the hours an employee works, as compared with the current system where leave only becomes available after a qualifying period – 12 months in the case of annual holidays – with entitlements expressed in weeks (or expressed in days after a six months’ qualifying period in the case of sick and bereavement leave). For an overview of the Act, please see our earlier article here: Employment Leave Bill Introduced

The Act will commence on the second anniversary of Royal Assent – ie 6 August 2028, some two years from now.

For a period of one year after the commencement date, employers must comply with the applicable employment agreement and comply with the Act. The key point here is that an employment agreement term prevails if it is more favourable to the employee than an equivalent term under the Act.

Examples of the potential impact of that during the initial 12 months’ period are as follows:

Employees, including part-time employees, may be entitled to ten days’ sick leave (if specified in the employment agreement), rather than an entitlement in hours proportionate to the number of hours worked.
Payment for sick and bereavement leave and alternative holidays may be at the rate of relevant daily pay (if specified in the employment agreement), as opposed to the ordinary rate plus fixed allowances.
Payment for working on a public holiday may be at double time (if specified in the employment agreement), as opposed to ordinary rate plus 50%.
Payment for annual holidays may be the greater of average weekly earnings and ordinary weekly pay (if specified in the employment agreement), as opposed to the ordinary rate plus fixed allowances. This may be especially relevant for staff on commission-based pay.

During the same period, employees will pick up the new benefits, such as the 12.5% leave compensation payment for any additional hours worked (that is, those over and above the standard hours); and there will be no qualifying period for sick, bereavement and family violence leave.

Entitlements for new employees from the date of commencement must be in accordance with the Act, which means an employer may be faced with managing two significantly different payroll regimes for the first 12 months, unless there is a plan to reach agreement on such matters before the commencement date.

After the initial 12 months’ period, all employment agreements must comply with the Act; and it is the employer’s responsibility to ensure that happens. This means:

If the agreement specifies an employee’s entitlement to annual holidays and sick leave, the entitlement must be specified as a proportion of an hour for each standard hour worked – not weeks or days respectively.
If the agreement specifies an employee’s entitlement to alternative leave, the entitlement must be specified as a proportion of an hour for each hour worked on the public holiday – not days.
If the agreement specifies an employee’s entitlement to public holidays, it must be specified in accordance with the Act.
If the agreement specifies an employee’s entitlement to leave payments, those entitlements must be specified in accordance with the Act.

Quite how an employer may be able to amend an employment agreement without the agreement of the employee, or the union party in the case of collective agreements, remains to be seen. Leverage will no doubt come from clause 6 of Schedule 1 which specifies that if an employment agreement does not comply with the Act 12 months after commencement, the minimum entitlements under the Act prevail.

In addition, there will be a process to convert existing entitlements to the new basis. There are prescribed calculations for converting existing entitlements to annual holidays, sick leave and alternative holidays, to hours. Bereavement leave and family violence leave entitlements remain in days, but the entitlement is available from the date of commencement.

Note that an employee has certain rights to use existing entitlements within the first year after commencement:

An employee may request to take their previous annual holidays, but in that case the employer may require the employee to take only their Type A entitlements (that is, leave entitlement remaining from their last leave anniversary date). If an employee does make a request to take their type A entitlements, the employer must agree. If an employee makes a request to take their Type B entitlements (that is, the annual holidays the employee has accrued since their last leave anniversary date), the employer must not unreasonably withhold agreement. Employees may of course prefer to take their full leave entitlement before the commencement date.
An employee may cash-up their previous annual holidays, however, there is a complicated formula to determine the maximum amount that may be converted to cash (approximately 25% of their entitlement less any leave already cashed out in the current year).
In respect of sick leave, the employer must convert the employee’s Type A previous sick leave entitlement (that is, sick leave remaining from the employee’s last sick leave anniversary date), to hours based on the employee’s ordinary daily hours. Then there is a complicated formula to convert the employee’s Type B previous sick leave to hours (that is, leave accruing since the employee’s last sick leave anniversary date).
In respect of alternative holidays, the employer must convert the employee’s previous entitlement to hours; and there is a prescribed formula for this process as well.

It will be very beneficial to resolve the transitional elements before the commencement date.

That means there is a need for an early start on such conversations. This will be particularly important if over the next few months, you will be renewing collective agreements for a term of more than one year.

We will provide more detailed analysis as the legislation progresses and comes into force.

For more advice contact: Tony Teesdale – 021 920 323; Mauro Barsi – 027 475 5583