Holiday Pay New Zealand: Guide for employers

The Holidays Act 2003 is the cornerstone of employment in New Zealand. It covers leave entitlements for employees, as well as how they should be paid for that leave and what’s required in employment agreements.

It’s a huge document… so why is it so complicated? Employers all over New Zealand have been clamouring for more clarity around the murky guidelines of the Act. That clarity is still in the works, but in the meantime, we can be across the current rules.

That’s why we’ve created a factsheet that covers how to calculate leave and holiday pay, so you can feel more confident when paying your employees. 

What’s in the guide?

In the guide, you’ll find information on:

• How to calculate holiday pay in NZ
• All of the key definitions you need to be across
• Record keeping obligations
• How Employment Hero can help support your business

Download the factsheet now by filling out the form on the right. 

How to calculate holiday pay in NZ

Getting holiday pay right can be challenging. There’s plenty at stake too, with significant financial penalties of up to $20,000 for miscalculations. We’ve collected the key information you need in our factsheet, including pay definitions and a guide to the main calculations. 

We’ve also added a summary below for annual leave and public holiday calculations. This is just a top level view, without the additional details available in the factsheet.  

Calculating pay for annual leave

When an employee takes annual leave, their annual holiday pay is at least the greater of:

• Their ordinary weekly pay (OWP) as at the beginning of the annual holiday, or
• Their average weekly earnings (AWE) for the 12 months immediately before the end of the last pay period before the annual holiday is taken.

Ordinary Weekly Pay (OWP) is the amount of pay an employee receives for an ordinary working week. If the OWP can’t be determined, you can calculate the OWP by taking the gross earnings for the last 4 weeks and dividing that by 4.

To calculate AWE, take the employee’s gross earnings over the 12 months leading up to the last pay period before the annual holiday and divide that figure by 52. If the employee has been employed for less than 12 months, their AWE is the weekly average of their gross earnings for the time they have been employed.

Calculating pay for public holidays

The employee is paid the Relevant Daily Pay (RDP) for each day they are off, or ADP if their RDP can’t be calculated.

Relevant Daily Pay (RDP) is the amount of pay an employee would have received if they had worked on a particular day. For a salaried employee, this is typically their standard daily rate. For a waged employee, it is the number of hours they would have worked on that day multiplied by their hourly rate, plus any regular allowances they would have received.

To calculate ADP, take the employee’s gross earnings over the 52 weeks prior to the public holiday and divide that amount by the number of days they worked in that period.

What is holiday pay?

Holiday pay (or annual holiday pay as referred to in the Holidays Act) is payment to an employee when they take annual leave or don’t work a public holiday. It’s among a number of different leave payments that employers must make when an eligible employee takes paid leave. 

Is holiday pay taxable in New Zealand?

Holiday pay is taxable by Inland Revenue and it should be included as earnings when paid to an employee. It’s subject to standard wage deductions, including PAYE, ACC levies, student loan repayments and KiwiSaver.  

Annual leave entitlements

Employees are entitled to four weeks of annual leave after 12 months of continuous employment for a single employer. They can take this leave in advance if mutually agreed with their employer. 

In limited circumstances, some employees may be paid holiday pay at the rate of not less than 8% of their gross earnings with their regular pay, instead of being provided with four weeks of annual leave each year. This is if the employee works so intermittently or irregularly that it is impractical for the employer to provide them with four weeks’ annual holidays.

Public holiday entitlements 

Employees get a paid day off on public holidays if it’s otherwise a working day for them and are entitled to a maximum of 12 public holidays a year. If they have to work a public holiday due to stipulations in their employment agreement and it is an otherwise working day for them, they are entitled to an alternative day off. They should also be paid at least time and a half for the hours they work. 

Sick leave and other leave types

There are a number of different leave types for employees in New Zealand. We’ve included a few of the most common below. 

For these three leave types, employees are eligible if: 

• They’ve been employed continuously for 6 months with the same employer, or
• Have worked for their employer for 6 months for:
  • an average of 10 hours per week, and
  • at least 1 hour in every week or 40 hours in every month.

If the employee is not yet eligible, they may mutually agree with their employer to take the leave in advance. 

Sick leave

Eligible employees in New Zealand receive 10 days’ paid sick leave per year. They can also carry unused sick leave through to the next year and can accumulate a maximum of 20 sick days. 

Bereavement leave (or compassionate leave) 

Eligible employees can take a minimum of three days of paid bereavement leave if a member of their immediate family or household dies, or one day of paid leave if someone close to them, outside of their immediate family, passes away.

Family violence leave

Eligible employees affected by family violence are entitled to take 10 days of paid family violence leave per year. They can also ask for short-term flexible working arrangements for up to two months.

Record keeping and compliance requirements

Managing leave can be a complex process, involving numerous details for every employee. But for employers, maintaining comprehensive records of pay and leave is not just a good practice. It’s a legal obligation.

In New Zealand, employers are required by law to keep clear and accurate records of wages, time worked and leave taken for each employee. These records must be retained for at least six years, even after an employee has left the company.

How Employment Hero can help

Clearly there’s a lot to stay on top of as an employer in New Zealand. The Holidays Act 2003 is difficult to interpret, leading to confusion around leave calculations. As this factsheet shows, it takes plenty of information to even understand the basics.

Our Employment Operating System can support your business with compliance. It’s an all-in-one employment solution that can calculate leave payments automatically and apply them to your payroll. The Employment OS is also updated with any changes to employment law, so you can feel confident that you’re working with the right information.

Find out more and get in touch with one of our business specialists.

The information in this article is current as at 26 August 2025, and has been prepared by Employment Hero Pty Ltd (ABN 11 160 047 709) and its related bodies corporate (Employment Hero). The views expressed in this article are general information only, are provided in good faith to assist employers and their employees, and should not be relied on as professional advice. Some information is based on data supplied by third parties. While such data is believed to be accurate, it has not been independently verified and no warranties are given that it is complete, accurate, up to date or fit for the purpose for which it is required. Employment Hero does not accept responsibility for any inaccuracy in such data and is not liable for any loss or damages arising directly or indirectly as a result of reliance on, use of or inability to use any information provided in this article. You should undertake your own research and seek professional advice before making any decisions or relying on the information in this article.