The rules, in plain English
Pay-as-you-go (8%) replaces your four weeks of annual holidays with an 8% top-up in each pay. Employment New Zealand only allows it in two situations: a genuine fixed-term agreement of less than 12 months, or work so irregular that giving four weeks off isn't practical. It has to be in your employment agreement and shown separately on your payslip.
Taking leave is different: a week of annual leave pays the higher of your ordinary weekly pay or your average weekly earnings over the previous 12 months. If your hours or pay jumped around — overtime, commissions, a recent raise — the average often wins, which is why Tool 2 compares both.
Worked example
A casual earning $1,150 a week gets $92 a week of pay-as-you-go holiday pay. A permanent employee whose normal week is $1,040 but who earned $57,200 over the last year (average $1,100 a week, thanks to overtime) must be paid $1,100 per week of leave — $4,400 for four weeks — because the average is higher.
Frequently asked questions
How does 8% pay-as-you-go holiday pay work?
Instead of taking four weeks of annual leave, you get an extra 8% of your gross earnings added to each pay. It's only allowed for fixed-term contracts under 12 months or genuinely irregular work, must be written into your employment agreement, and must appear as a separate line on your payslip.
Can my employer just choose to pay 8%?
No — not for regular full-time or part-time staff. If your work pattern is regular, you must receive actual annual holidays. Pay-as-you-go outside the two allowed situations doesn't meet the Holidays Act, even if you agreed to it.
How is annual leave pay calculated when I take leave?
You get the higher of your ordinary weekly pay (OWP — what you'd normally earn for that week) or your average weekly earnings (AWE — your gross earnings over the last 12 months divided by 52).
What counts in gross earnings for the 8%?
Gross earnings include wages, salary, allowances, overtime, commissions and piece-work — basically all taxable pay before deductions, as defined by the Holidays Act.
I resigned — what holiday pay do I get in my final pay?
You receive pay for any untaken annual holidays you're entitled to, calculated the same OWP/AWE way, plus — if you've worked less than 12 months or are on pay-as-you-go terms ending — an amount based on 8% of your gross earnings since your last entitlement date, less any holiday pay already taken or paid.
Rates checked against official sources on 1 November 2026: Employment NZ pay-as-you-go rules and Employment NZ annual holiday pay. See how we calculate for the full method and update log.