The Holidays Act 2003: what employers have to pay

Annual holidays: 4 weeks after 12 months

Every employee — full-time, part-time or casual — becomes entitled to 4 weeks of paid annual holidays after 12 months of continuous employment, and another 4 weeks after each further 12 months. “Weeks” rather than days is deliberate: a part-timer’s week is their own working week, so 4 weeks off for a 3-day-a-week employee is 12 working days.

Before the 12-month anniversary there is no entitlement yet, although you can agree to let someone take holidays in advance. If employment ends before the anniversary, holiday pay for the time worked since the last anniversary is paid in the final pay.

The greater-of test: ordinary weekly pay vs average weekly earnings

For each week of annual holidays, pay at least the greater of:

• Ordinary weekly pay (OWP) at the start of the holiday — what the employee normally earns in a week, including regular allowances, regular overtime, regular incentive payments and the cash value of board or lodgings, but not one-off bonuses, discretionary payments or employer superannuation contributions.
• Average weekly earnings (AWE) — gross earnings for the 12 months up to the end of the last pay period before the holiday, divided by 52 (or by the weeks employed, if under a year).

Where OWP cannot be worked out — hours vary by more than a minor amount, or overtime is regular but unpredictable — use the formula: take gross earnings for the 4 weeks before the holiday (a), subtract one-off and discretionary payments (b), and divide by 4. That is (a − b) ÷ 4.

Worked example

An employee is rostered 40 hours a week at $25 an hour, so OWP is $1,000. Over the past 12 months they also picked up extra shifts and earned $57,200 in total, so AWE is $57,200 ÷ 52 = $1,100. A week of annual holidays must be paid at $1,100. Paying the rostered $1,000 underpays by $100 for every week of holiday taken.

The calculation is done once, at the start of the holiday, even if it spans several pay periods. Holiday pay is due before the holiday starts unless the employee has agreed in writing to be paid in the normal pay cycle.

Relevant daily pay and average daily pay

Public holidays, alternative holidays, sick leave, bereavement leave and family violence leave are paid by the day, not the week:

• Relevant daily pay (RDP) — what the employee would have earned had they worked that day, including usual pay, incentive payments, the cash value of board or lodgings, overtime and other regular allowances.
• Average daily pay (ADP) — gross earnings for the 52 calendar weeks to the end of the last pay period, divided by the number of whole or part days the employee worked or was on paid leave or holidays in that time.

ADP is not a free choice. It can only be used where RDP is not possible or practicable to work out, or where the employee’s daily pay varies within the pay period. In all of these cases payment is only due for an otherwise working day.

8% pay-as-you-go: the limits

Paying 8% of gross earnings with each pay instead of giving 4 weeks off is allowed only where:

• the work is so irregular or intermittent that providing 4 weeks of paid annual holidays is impracticable — Employment New Zealand reads that as impossible in practice, not merely inconvenient; or
• the employee is on a genuine fixed-term agreement of less than 12 months, with the reason for the fixed term recorded.

It must also be agreed in the employment agreement, be at least 8% of gross earnings, and be shown as a separate amount on the payslip. Calling someone casual does not qualify them: it is the actual work pattern that counts. A “casual” who works the same three shifts every week has a regular pattern and is entitled to 4 weeks of annual holidays, and paying them 8% instead can leave the employer owing the 4 weeks anyway.

Cashing up and keeping records

An employee can ask to cash up up to 1 week of their 4-week entitlement each year. The request has to be in writing, you must consider it within a reasonable time, and you can say no. The rest is taken as time off.

Every one of these calculations depends on records of hours worked, gross earnings and leave taken — the wage and time record and the holiday and leave record. Without 12 months of reliable gross earnings you cannot work out AWE, and without the roster pattern you cannot settle “otherwise working day”. RosterElf’s leave management keeps leave and the roster in the same place.

The 2028 change: the Employment Leave Act 2026

The Employment Leave Act 2026 passed into law in August 2026 and replaces the Holidays Act on 6 August 2028. It changes how annual leave, sick leave, family violence leave, bereavement leave, public holidays and alternative leave are earned, taken and paid. Employment New Zealand is explicit that the Holidays Act still applies until that date and that employers cannot start following the new law early. Payroll providers and employers have two years to update systems, agreements and policies; detailed guidance is being published in stages.

Related guides

• Public holidays 2026 — time and a half and alternative holidays
• Sick leave — 10 days, carry-over and proof
• Minimum wage — the pay that leave calculations start from

Sources

Checked on 15 October 2026.

• Employment New Zealand — Annual holiday pay
• Employment New Zealand — Calculating holiday and leave pay
• Employment New Zealand — Pay-as-you-go annual holiday payments
• Employment New Zealand — Cashing up annual holidays
• Employment New Zealand — Employment Leave Act 2026
• New Zealand Legislation — Holidays Act 2003