How Annual Leave and Holiday Pay Work

During the first 12 months of employment an employee has no annual leave due. Most employers will still allow employees to take annual leave during this period, but this leave will be taken in advance. If the employee finishes their employment before being employed for 12 months they are paid out their Holiday Pay Due balance in their final pay, which is typically 8% of their gross earnings. The value of any leave they have taken in advance will then be deducted from their final pay.

As those initial 12 months of employment progress, the employee's gross earnings will increase along with their Holiday Pay Due balance. 

Once the employee crosses their first employment anniversary they will become entitled to their Annual Leave, the following will occur:

• 4 weeks of Annual Leave become due and are added into their Current Leave Due balance.
• The Holiday Earnings, Holiday Pay Due and Estimated Leave in Advance balances are set to zero.

This process will then start again with the employee's Holiday Pay Due balance accumulating until they cross the following employment anniversary.

At any time an employee is owed two separate amounts - Holiday Pay Due and Current Leave Due. If the employee finishes employment during their second year they will be paid out the Holiday Pay Due accrued for that portion of the year on top of any Current Leave Due. See the MBIE Website for additional details on processing Leave and Holidays in a Final Pay.

Holiday Pay Due is typically 8% of gross earnings and is shown as a dollar amount. Current Leave Due is stored in weeks but can be viewed in either days or hours if the employee's work pattern includes enough detail to display a conversion.

The fields on the Employee Leave tab represent:

Holiday Earnings - The employee's gross earnings from their Holiday Pay 'Since Date', excluding any earnings that aren't eligible for Holiday Pay.

Holiday Pay Accrued - Typically 8% of the employee's earnings since their Employment Start Date or Holiday Pay 'Since Date'.

Holidays Paid Out - This will appear for employees on Holiday Pay As You Go and shows the amount of Holiday Pay currently paid out.

Holiday Pay Due - The Holiday Pay amount, less any Holidays Paid Out, that would be owed to the employee if their employment finishes.

Current Leave Due - Annual leave due less any annual leave taken since the last anniversary. This is the leave balance that will be paid out in a final pay, along with Holiday Pay Due.

Estimated Leave in Advance - Found through the blue info icon on Holidays Due, this balance is an estimate of how much leave in advance the employee could take for the current entitlement year.

Note - Annual Leave Taken is included in gross earnings balances, subsequently when an employee is paid for annual leave taken their Holiday Pay balance will increase. It may seem as though you're double paying here, however, when an employee takes annual leave they are still employed with you and should continue to accrue annual leave.