This week, the Government introduced the Employment Leave Bill, which will replace the Holidays Act 2003 in its entirety, signalling one of the most significant changes to leave entitlements in decades. The Bill aims to simplify calculations and reduce widespread non‑compliance caused by the complexity of the current regime.
Key changes include:
- Annual and sick leave will accrue and be used in hours, rather than weeks or days.
- Employees will be eligible to accrue leave entitlements from their first day of employment.
- Casual employees will receive a 12.5% leave compensation payment for all hours worked (an increase from the current 8% holiday pay rate). Permanent or fixed-term employees who work additional hours will also be entitled to the leave compensation payment for each additional hour worked.
- Leave entitlements will be paid using a standard hourly leave rate, rather than employers having to choose between different payment methodologies.
- A new test for determining what is otherwise a working day for leave calculation purposes.
The Bill has been introduced to Parliament. While it still has to work through the Select Committee process this year, it is expected to pass into law before the election. There will then be a 24‑month transition period once enacted to allow employers to ensure their compliance including updating employment agreements and payroll systems.
These changes, if implemented, will require significant payroll and agreement updates, and early preparation will be essential. If you want to know more, you can read our last article about the Government’s change proposal here.
If you have any questions, please contact a member of our employment law team.
Special thanks to Partner Alastair Espie, Senior Associate Jonny Sanders and Solicitor Holly Kerr for preparing this article.
Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.
