Understanding the New Employment Leave Act: Part Two– The Impact on Sick Leave Entitlements

The way employees earn and use their leave will change significantly when the new Employment Leave Act comes into force in 2028. This new legislation reshapes leave entitlements, affecting both employers and employees. Understanding these changes is essential for managing time off fairly and efficiently. In Part Two, this article explains the key points of the new Act in respect to how sick leave accrual will work and what it means for taking sick leave.

For an insight on changes to annual leave see Part One of this series.

How Sick Leave Entitlements Generally Work Now

Currently, sick leave entitlements come into effect after six months' of continuous employment with an employer. At the end of the first six month's the employee becomes entiled to a minimum of 10 days sick leave, regardless of whether they are part-time or full-time. That 10 days is available for the employee to use for personal illness or injury or to take time to care for a dependent who is ill or injured. The employee becomes entitled to a further 10 days sick leave on each 12 month anniversary of receiving their first entitlement.

Sick leave is determined in days. So a part time employee is still entitled to 10 days sick leave, as is a full-time employee.

Depending on the terms of the employee's employment agreement, the employer may allow the employee to access their paid sick leave from day one of their employment unless the employment agreement specifically specifies the six month wait before the entitlement arises.

Currently the maximum sick leave an employee may have at any one time is 20 days sick leave. This means if the employee has not used any of their sick leave they may carry this over to their next 12-month period, meaning they can have 20 days available for the coming 12 month period.

Again, sick leave is a minimum entitlement and the employer and employee may allow for different amounts of sick leave, and sick leave accrual. The minimum entitlement is 10 days and the employee is allowed to have at least 20 days accrued and current sick leave.

The new Employment Leave Act changes how leave will accrue and how it can be taken.

Key Changes in Sick Leave Accrual

The new Act introduces a more flexible and transparent way to accrue leave. Sick leave will accrue continuously based on the actual standard hours worked.  The employee will be able to use their sicleave as it accrues. This means sick leave will build up gradually, allowing for more accurate tracking and employees don't need to wait six months before being able to access their sick leave.

When the Act comes into force, any sick leave employees have under the current Holidays Act will convert over into the new system so there is no loss of leave entitlements.

Continuous Accrual

With the exception of casual employees, an employee’s sick leave will accrue based on the number of standard hours or part hours they work.  For each standard hour or part of a standard hour, an employee will accrue not less than 0.0385 of an hour of sick leave. For example:

• An employee earns leave based on their standard hours of work at a rate of not less than 0.0385 hours per hour or part hour.

• For someone who works 37.5 standard hours a week their sick leave accrual would be equivalent to 1.44375 hours (37.5 x 0.0385) per week.

• For someone who works 20 standard hours a week their leave accrual would be 0.77 hours (20 x 0.0385) per week.

  
  

Standard Hours

As explained in Part One, Standard Hours are those hours the employer requires the employee to work and for which they will pay the employee, regardless of whether the employer in fact requires the employee to work those standard hours. 

Refer to Part One for more information on what is and is not covered by Standard Hours.

When an employee works additional hours, over and above their Standard Hours, rather than accruing annual and sick leave for those additional hours, the employee will be compensated by a Leave Compensation Payment (LCP) at a rate of not less than 12.5% of the employee’s ordinary hourly rate for each relevant hour or part hour worked in addition to Standard Hours. This 12.5% is compensation for both annual and sick leave.

Carry-Over of Sick Leave

Untaken sick leave can be carried over from one year to the next to a maximum of 160 hours. Once an employee has accrued 160 hours of sick leave, they cease to accrue additional sick leave until their total sick leave hours are less than 160 hours.

The Act does not prevent an employee and their employer from agreeing that the employee may be entitled to accrue additional sick leave over and above 160 hours.

An employer may also allow an employee to take sick leave in advance of the employee accruing the sick leave

Use of Sick Leave

An employee may use their sick leave to cover an absence due to illness or injury for themselves or a dependent for any of their Standard Hours as specified in their employment agreement.

An employee may also take sick leave for any additional hours they would have been required to work under an availability provision or that are specified in a work roster or notional roster for which the employee and employer have agreed the employee is to work those additional hours.

Sick Leave and Annual Leave

The employer may allow an employee who is on annual leave to take any period of that annual leave as sick leave if the employee (or a dependent) becomes ill or injured while on annual leave.

If the employee (or their dependent) becomes ill or injured before the employee commences their annual leave the employer MUST allow the employee to take sick leave.

If an employee has exhausted their sick leave, the employer CANNOT require the employee to use their annual leave to cover their absence. The employer may allow the employee to use their annual leave when the employee requests to cover an illness or injury by annual leave. However, in such circumstances the employer may only allow the employee to use current annual leave, not their acrrued annual leave.

Sick Leave and Parental Leave

To determine what sick leave accrues when a person is on parental leave, if in the 3 months before commencing their parental leave, the employee and their employer agree a temporary change to the employee’s standard hours, the sick leave will accrue based on the employee’s standard hours immediately before the date on which the temporary change commenced. 

In all other cases, sick leave will accrue based on the employee’s standard hours immediately before they commence their parental leave.

When Sick Leave Does Not Accrue

For the purpose of calculating an employee’s sick leave, an employee does not accrue sick leave for any time the employee is absent from work or has taken leave if the employer and employee agree that the employee does not accrue sick leave the leave or absence.

An employee also does not accrue sick leave if they take unpaid leave under the Volunteers Employment Protection Act 1973; the Parental Leave and Employment Protection Act 1987; or the Juries Act 1981.

Sick leave also does not accrue for any absence covered by ACC compensation. For clarity, sick leave does accrue for any ACC absence for which the employee uses their paid sick leave or any time they work while being covered by ACC.

For clarity, an employee cannot take sick leave for any period of time they are on parental leave, volunteers leave, on paid accident leave (ACC), or on any unpaid leave.

Under the new Transitional Matters

The new Employment Leave Act will apply from an existing employee’s first pay period that starts after the commencement date.

The employer must ensure that their employment agreements are updated and comply with the Act within one year of commencement of the Act.

Next step: Employers have time to review their employment agreements and company policies however should not leave it to the last minute as you will need to ensure they align with the new Employment Leave Act when it comes into force in 2028. Open dialogue between employers and employees will make the transition smoother and support a positive workplace culture.

Disclaimer: This blog does not touch upon every aspect of the new Act as it applies to Sick Leave and is only presented to give a better insight to the changes that will apply when the legislation comes into force on 6 August 2028. This blog provides general information about the new Employment Leave Act and does not constitute professional or legal advice.