Holiday pay at 8% of gross earnings.
Holiday pay (8%)
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Total gross including holiday pay
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Your breakdown
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Pay-as-you-go holiday pay, in plain terms
Under the Holidays Act, most employees earn four weeks of paid annual leave a year. But for genuinely casual staff, and some fixed-term workers on short engagements, there is a second option: instead of accruing leave they cannot easily take, you pay 8 percent of their gross earnings on top of every pay. That 8 percent is holiday pay paid as you go, and it has to be shown as a separate, identifiable item on the payslip. This calculator does the one piece of arithmetic that matters: it takes gross earnings and returns the 8 percent owed, plus the combined total.
Why 8 percent? Four weeks of leave is roughly 8 percent of a 52 week year (four divided by fifty-two is about 7.7 percent, rounded up to a clean 8). So paying 8 percent as you go is meant to be the cash equivalent of the leave a permanent worker would have banked.
Who genuinely qualifies for pay-as-you-go
This is the part employers get wrong most often. Pay-as-you-go is only lawful where the work is genuinely intermittent or irregular, or the fixed term is less than 12 months and both sides agree in the employment agreement. A worker on a regular roster, even if labelled "casual", is usually entitled to the full four weeks of leave instead. Misclassifying a regular employee as casual to use the 8 percent route is a common and costly mistake, because you can end up owing leave entitlements on top of what you already paid. If the pattern of work looks permanent, treat it as permanent.
A casual worker who earned $25,000
Imagine a casual hospitality worker who picked up shifts through the year and earned $25,000 gross. Their holiday pay is calculated like this.
So the worker should receive $2,000 of holiday pay across the year on top of their $25,000 in shift earnings, for $27,000 in total gross. PAYE and the ACC earner levy still apply to the holiday pay, because it is ordinary taxable income. The chart shows the 8 percent slice sitting on top of base earnings.
Holiday pay on a final pay
When someone leaves, holiday pay shows up again. For a casual on the 8 percent arrangement, you pay 8 percent on any earnings since their last anniversary that have not already had holiday pay applied. For a permanent employee, the final pay must include 8 percent of gross earnings since their last leave anniversary, in addition to paying out any annual leave they had already become entitled to but not taken. Getting final pay right matters, because unpaid holiday pay is a frequent source of personal grievance claims. When in doubt, run the 8 percent over the relevant earnings and check it against any leave already accrued.
One practical caution: 8 percent is a floor, not a ceiling. An employment agreement can promise more, and if it does, the contract wins.
Is the 8 percent taxed?
Yes. Holiday pay is gross taxable earnings like wages, so PAYE and the ACC earner levy come off it before it reaches the worker. The 8 percent in this tool is the gross figure; the take-home will be lower once tax is deducted at the employee’s marginal rate.
Can a permanent employee be paid 8 percent instead of getting leave?
Generally no. Permanent staff are entitled to four weeks of actual paid annual leave, and cashing out is tightly limited. An employee may request to cash up to one week of their four, at the employer’s discretion, but the rest must be taken as time off. The 8 percent pay-as-you-go route is reserved for genuine casual and short fixed-term work.