Public holidays are where a lot of payroll headaches live, usually starting with one deceptively simple question: would this person have worked that day anyway? Sounds easy, right… 

The Employment Leave Bill keeps the idea the same but adds a clearer test for answering it, tweaks how public holiday pay is calculated, and changes how alternative holidays are gained. Here is the rundown.

As always, this is future legislation, coming into force in 2028. The current Holidays Act 2003 still applies until then.

The Otherwise Working Day gets clearer

Whether an employee is entitled to a paid day off, or to an alternative holiday, will still depend on whether the public holiday falls on an Otherwise Working Day (OWD) for them.

The starting point stays sensible: a day will be an OWD if the employee would have worked it according to the days, or pattern of days, set out in their employment agreement.

The useful new bit is a clear test for when that is not obvious, for employees with standard hours but no set days, and for employees with only casual hours. The test will be satisfied if the employee worked (or was on paid or unpaid leave) on 50% or more of that day of the week over the preceding 13 weeks. So if a public holiday falls on a Monday, you look back over the last 13 Mondays and check whether they worked at least half of them. It turns a judgement call into a calculation, which is exactly what has been missing.

Lots of people have believed that there already was a number you could count and test for this entitlement, but that’s not the case - there’s no stated number of weeks in the Holidays Act you can use to look back to decide. In the meantime, as you still have to work out Otherwise Working Days for the next two years without this test - check out our article on that topic here: https://help.paysauce.com/en/articles/13048153-otherwise-working-days 

How public holiday pay will change

If an employee does not work a public holiday that is an OWD, they will be paid a leave payment for the hours they would otherwise have worked, the same as any other leave.

If they do work a public holiday, there’s a subtle change relating to the ‘half’ time of the time and a half. For each hour worked, the employer must pay all the contractual rates due for the day, plus the greater of 50% of the employee's ordinary hourly rate or any "identifiable amount" (an extra rate already payable for that day of the week or for a public holiday). The key shift is that the extra 50% will no longer stack on top of a higher contractual rate. Where an employee already gets a premium for that day, they get the greater of the two, not both.

An example makes it clearer. Say an employee earns $30 per hour, with a $65 per hour Saturday rate. If they work an ordinary hour on a public holiday that falls on a Saturday, they are paid $30 plus the greater of 50% of $30 ($15) or the Saturday premium ($65 - $30 = $35). The greater is $35, so they earn $65 for the hour. If there is no special rate for the day, they simply get their pay for the hour plus 50% of their ordinary rate.

Alternative holidays will accrue in hours

Today, working a public holiday that is an OWD earns a whole alternative holiday, no matter how much of the day you actually worked. Under the new system, alternative leave will accrue by the hour: one hour of alternative leave for every hour worked on a qualifying public holiday, and part hours for part hours. There are specific rules for being on call, too.

Alternative leave will also be more flexible to use. It will be able to be taken on any day the employee could have worked under their agreement, and cashed up by agreement at any time, removing the current 12 month wait.

What should employers do now?

No immediate action is required, because the current rules still apply until the new Act comes into force. The most useful preparation is keeping accurate records of the days and hours your people actually work, since the OWD test, public holiday pay and alternative leave all lean on that history. We walk through the full detail, including more worked examples and the on-call rules, in our help centre.

More to come

This is very much a picture that will keep filling in. MBIE has said it will roll out further guidance and resources over the transition period, including technical guidance for payroll providers, which means more detail will land steadily between now and when the new rules take effect.

We will keep this content up to date as things firm up, and share more as we go, so you can expect the detail to arrive in manageable pieces rather than all at once right before the deadline. That is the job of a good payroll provider: to stay across every change and get the systems ready behind the scenes, so you are supported through the transition instead of left to decode legislation on your own.

Want to go deeper?

For the full detail, head to our Employment Leave Bill help centre. It covers the OWD test, public holiday pay with more worked examples, alternative holidays, on-call rules and transferring a public holiday.

And if you are a PaySauce customer, you can go one better. Use the chat feature inside PaySauce to ask anything you like about the new leave rules. Just make it clear you are asking about the new leave entitlements or the Employment Leave Bill (for example, "how will public holiday pay work under the new leave rules?"), and you will get answers drawn specifically from our dedicated guidance on the changes, rather than the current rules. Ask away, that is what it is there for.

Public holidays FAQs

What is the new Otherwise Working Day test?
Where an employee's agreement does not set out their days of work, a day will count as an Otherwise Working Day if they worked (or were on paid or unpaid leave) on 50% or more of that day of the week over the preceding 13 weeks.

How will public holiday pay change?
For hours worked on a public holiday, employees will get their contractual pay plus the greater of 50% of their ordinary hourly rate or any premium already payable for that day. The extra 50% will no longer stack on top of a higher contractual rate.

How will alternative holidays work?
Alternative leave will accrue by the hour, at one hour for every hour worked on a public holiday that is an Otherwise Working Day, and it can be cashed up by agreement at any time.

When will these changes take effect?
It comes into effect 6 August 2028. 

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