Pay-as-you-go holiday pay (the 8% approach) looks simple - and it is where the legal conditions are met. Where employers get this wrong, the usual outcome is expensive: the worker can still become entitled to 4 weeks annual holidays, and the employer may not be able to claw back the 8% already paid.
Employer checklist (Holidays Act section 28)
- Is the worker genuinely fixed-term for less than 12 months, or so intermittent/irregular that providing annual holidays is impracticable?
- Does the employment agreement clearly state holiday pay will be paid with wages (and at least 8%)?
- Is the 8% shown as an identifiable component on payslips?
- Are you tracking the engagement over time so casual work does not drift into regular ongoing employment?
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 for the Deals on Wheels magazine. Read our full article:
Download File: Pay-As-You-Go Holiday Pay
Common problems we see
- "Casual" on paper, regular in reality: fixed roster patterns and ongoing work can defeat the section 28 justification.
- No written agreement term: paying 8% is not enough without the agreement requirement.
- Payslips not itemised: if the 8% is not clearly identified, you are exposed.
- Fixed-term misuse: rolling fixed-terms can create additional risk beyond holiday pay.
If you are an employer and want a quick review of your holiday pay approach and employment agreement clauses, submit the case form and attach an anonymised payslip example and the employment agreement.
Employee Case Form
![Sidney Yu and Jing Tham v Queenstown Nursery Limited [2026] NZERA 446 - casual employment, fixed assignment and unjustified dismissal](/Images/site/EmploymentAdvocatesAucklandCard.jpg)