Annual leave in New Zealand — entitlements and obligations

After 12 months of continuous employment

Employees become entitled to a minimum of 4 weeks of paid annual leave after each 12 months of continuous employment. The entitlement arises on the anniversary of the employee's start date — not at the end of the financial year.

Employees who have not yet reached their 12-month anniversary can, by agreement, take annual leave in advance before it accrues.

Employer must use the higher of two rates

Annual leave must be paid at the higher of:

• Ordinary weekly pay — what the employee earns in a normal working week
• Average weekly earnings — total gross earnings over the previous 52 weeks ÷ 52

This protects employees who earn variable income (commission, overtime, allowances). If they regularly earn more than their base rate, the average calculation will be higher.

By agreement — employer cannot unreasonably withhold consent

Annual leave is taken by agreement between employer and employee. The employer can set reasonable conditions — for example, minimum notice periods or restrictions on leave during peak periods. However, the employer cannot unreasonably withhold consent if the employee has accrued leave and has given reasonable notice.

If agreement cannot be reached, the employer can direct the employee to take leave by giving 14 days notice.

Up to 1 week can be cashed up per year — employee must request it

An employee can request to cash up up to 1 week of their 4-week entitlement each year. The employer can agree or refuse — it is at the employer's discretion. The cash-up must be paid at the rate that would apply if the employee took the leave.

An employer cannot require an employee to cash up leave — it must be the employee's choice.

All unused leave must be paid out

When employment ends, any accrued but untaken annual leave must be paid out. For employees who haven't yet reached their 12-month anniversary, they are entitled to 8% of gross earnings for the period worked.

Can convert to sick leave if ill during annual leave

If an employee becomes sick or injured while on annual leave and has sick leave available, they can request that the period of illness be treated as sick leave rather than annual leave — with a medical certificate if required.