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Pay as you go holiday pay

Holidays Act 2003 Holidays Act 2003 Casual Employment Casual Employment

Strict conditions must be met for an employer to pay an employee pay-as-you-go holiday pay in casual employment and fixed-term employment placements that exceed 12 months.

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Holiday pay for casual workers

For an employer to pay 8% pay-as-you-go holiday pay, for employment that continues beyond a duration of 12 months there are rules that apply, otherwise the employee could become entitled to four weeks holiday pay regardless of being paid 8% with regular pay.

If an employer incorrectly pays holiday pay with an employee's regular pay and the entitlement arises, an employer is typically unable to recover holiday pay already paid as overpayments. An employer who does not strictly comply with the conditions of the Holidays Act 2003 for use of section 28 does so at its own, costly, peril.

Pay-as-you-go holiday pay

When annual holiday pay may be paid with employee's pay:

  • The employee is either genuinely under a fixed-term employment agreement for less than 12 months; or works for the employer on a basis that is so intermittent or irregular that it is impracticable for the employer to provide the employee with 4 weeks' annual holidays.
  • The employee agrees in his or her employment agreement.
  • The annual holiday pay is paid as an identifiable component of the employee's pay
  • The annual holiday pay is paid at a rate not less than eight percent of the employee's gross earnings.

These conditions are all conjunctive which means that all of these conditions have to be met. If not and an employee becomes entitled to holidays after working a period of 12 months during their employment, then the employee can make a claim for holiday pay.

Read our full article

We write employment law commentary for the Deals on Wheels magazine. Read our full article:

Pay-As-You-Go Holiday Pay Download File: Pay-As-You-Go Holiday Pay

Last Updated: July 24, 2021 0800 WIN KIWI