Cashing up your annual holidays

Employees can request 1 week of their 4 weeks minimum annual holiday entitlement each year to be cashed up.

If an employee chooses to, they can ask their employer if they can cash up 1 week of their 4 week minimum annual holiday entitlement each year and get paid that money instead of taking that 1 week of leave. If the employee and the employer agree to this, the cashed-up amount must be paid as soon as practicable after the employee has agreed to the cash-up.

What employees can do

Employees can ask their employer to pay out in cash, up to 1 week of their 4 week minimum entitlement to annual holidays per year for each entitlement year.

They can do this all at once or can make multiple requests to cash-up until the entire 1 week is cashed up.

For example, an employee with an anniversary date of 1 June can request up to 1 week’s holiday that they become entitled to on 1 June in the following year be paid out. Their request can be made at any point in the entitlement year that runs from 1 June to 31 May the following year.

Managing annual holidays

Taking annual holidays

What employers can do

An employer:

  • must consider a cash-up request within a reasonable time
  • may say no
  • must inform the employee in writing
  • does not have to give a reason for their decision.

An employer can have a workplace policy that covers all or part of the workplace. This policy can state that they do not have to consider requests for annual holidays cash up. If that is the case, then the above does not apply.

Creating policies and procedures

What employers cannot do

An employer cannot:

  • pressure an employee into cashing up holidays
  • raise it in wage or salary negotiations
  • make cash up a condition of employment
  • put a cash-up request into an employment agreement but can include the process for making a request.

Paying employees

Paying out cashed-up annual holidays

If an employer agrees to pay out some of the employee's annual holidays, they need to pay as soon as they can, usually the next pay day (and keep a record of the date and amount paid). The payment must be at least the same amount as if the employee had taken the holidays.

If an employer agrees to pay out some of the employee's annual holidays, but the employer and employee cannot agree on the proportion or payment amount, MBIE’s Labour Inspectorate may be able to provide support and decide for them.

Contact us

In the event an employer pays out a portion of the employee's annual holidays, and the employee did not ask for the cash up or, the employer has not been given a written request to cash up the annual holidays. The employee is entitled to keep the cash-up money and still take the portion of annual holidays cashed up as paid holidays.

The employer may also face a penalty, which the Employment Relations Authority can order.

Penalties can be up to $10,000 per breach if the employer is an individual or $20,000 per breach if the employer is a company.

Taking parental leave may have an impact on the amount that an employee is paid when they take an annual holiday and how much a cashed-up annual holiday is paid out at.

Parental leave provides information for employers, employees and self-employed people about parental leave and associated entitlements.

Parental leave

Inland Revenue has information about the impact that cashing up annual holidays may have on superannuation payments, working for families, child support and income tax.

Inland Revenue(external link)

Cashing up additional holidays

If an employment agreement provides annual holidays in addition to the minimum of 4 weeks, it may also provide for the additional holidays to be cashed up. For example, if the employment agreement provides 5 weeks’ annual holidays per year and 2 weeks could be cashed up, this would be allowed.

If the employment agreement provides 5 weeks per year and that all 5 weeks could be cashed up, then this would go against the Holidays Act 2003 and the employee would not be able to cash up more than 2 weeks’ annual holidays even with their employer’s agreement.

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