Cashing Up Annual Leave in New Zealand: How It Works

Cashing up annual holidays means asking your employer to pay you for annual holidays instead of taking them as time off. In New Zealand you can ask to cash up a maximum of one week of your four-week minimum entitlement per entitlement year, the request must be in writing, and your employer can decline without giving a reason.

It is a genuinely one-way street: employees may ask, employers may refuse, and employers may not raise it themselves. Getting that direction backwards is the most common compliance failure in this part of the Holidays Act 2003.

Key Takeaways

• You can ask to cash up up to one week of the four-week minimum entitlement each entitlement year, per Employment New Zealand.
• The request must be in writing; the employer’s answer must also be in writing, and no reason is required.
• Employers must not pressure you to cash up, and cannot make it part of pay negotiations or a condition of employment.
• Payment must be at least what you would have received had you taken the holidays — the greater of ordinary weekly pay or average weekly earnings.

What Cashing Up Annual Holidays Actually Means

Cashing up converts leave into money. You keep working, your annual holidays balance drops, and you receive a payment. It is not a bonus and it is not extra pay — you are spending a balance you would otherwise have taken as rest.

Three boundaries define it:

• It applies to the four-week statutory minimum, capped at one week per entitlement year.
• Any extra contractual weeks above the statutory four can be cashed up separately if your employment agreement allows it, and the one-week cap does not apply to those extra weeks.
• It only applies to annual holidays you are entitled to. Holidays accruing in your first 12 months cannot be cashed up, because there is no entitlement yet.

The Rules, Step by Step

1. You make the request in writing. Email is fine. You can ask for the full week at once, or make several smaller requests until the week is used up.
2. Your employer considers it in good faith, within a reasonable time. They cannot leave it unanswered.
3. Your employer replies in writing. They may say no, and they do not have to give a reason.
4. If a workplace policy says the employer will not consider cash-up requests, that policy is lawful, and steps 2 and 3 do not apply.
5. If it is approved, payment follows promptly — as soon as practicable, usually the next pay run — and your balance reduces by the cashed-up amount.

Your employer must also keep records: the portion of annual holidays cashed up, the amount paid, and the date it was paid. Those records matter if the arrangement is ever reviewed, and they are what a Labour Inspector will ask for.

How Much Do You Get Paid? A Worked Example

The payment must be at least what you would have received had you actually taken the leave. That means the Holidays Act “greater of” rule applies: ordinary weekly pay (OWP) or average weekly earnings (AWE), whichever is higher.

Tane earns a salary of $70,000 and received $4,000 in commission over the last 12 months. He asks to cash up one week.

• Ordinary weekly pay: $70,000 ÷ 52 = $1,346.15
• Average weekly earnings: ($70,000 + $4,000) ÷ 52 = $74,000 ÷ 52 = $1,423.08
• Greater of the two: $1,423.08 gross

Tane is paid $1,423.08, taxed as an extra pay lump sum, and his annual holidays balance drops from four weeks to three. Had his employer paid the salary figure of $1,346.15, that would be a $76.93 underpayment on a single week — small in isolation, and exactly the kind of error that compounds into a six-figure remediation across a few hundred staff and a few years.

If your pay varies, the AWE figure is usually the higher one, so never assume the salary-divided-by-52 number is correct. Our guide to calculating leave pay with OWP and AWE works through the harder variable-hours cases.

What Your Employer Must Not Do

The prohibitions are as important as the entitlement.

Not allowed	Why
Asking or encouraging you to cash up	The request must come from the employee
Making cash-up part of a pay review or wage negotiation	Explicitly prohibited
Making cash-up a condition of employment or promotion	Explicitly prohibited
Paying less than the greater of OWP and AWE	Underpayment under the Holidays Act
Cashing up more than one week of the statutory minimum in a year	Beyond the statutory limit
Cashing up your leave without a written request	No valid request exists

A policy of “we do not cash up annual holidays at all” is lawful. A practice of offering cash-up to staff whose leave balances are inconvenient is not.

Should You Cash Up? A Decision Table

Your situation	Worth considering	Reason
Balance well above four weeks and you take leave regularly	Yes	You are cashing up surplus, not rest
Balance at or below four weeks	Usually no	You are trading away your only rest
One-off financial need, no leave planned in the next quarter	Maybe	Weigh it against the burnout cost
Employer suggested it to you	Stop	The suggestion itself should not have been made
You are resigning soon	No	Unused annual holidays are paid out in your final pay anyway

Rest has a value that does not show up in a payslip. New Zealand employers carrying large leave balances usually have a leave-taking problem, not a cash-up opportunity — and a workforce that never takes its four weeks is a workforce running an unrecorded fatigue risk.

What Changes If the Employment Leave Bill Passes

As at July 2026, the Employment Leave Bill 2026 would repeal and replace the Holidays Act 2003 and, among other changes, allow employees to cash up a larger proportion of their annual leave balance than the current one-week limit. The Education and Workforce Committee reported the Bill back in July 2026 recommending it be passed, and Employment New Zealand states the new legislation is proposed to take effect two years later, in 2028, with employers required to follow the current Holidays Act rules until then.

In other words: the one-week limit is the law today, and will be for some time. Do not build a 2026 policy on a 2028 rule. Our explainer on the Employment Leave Bill 2026 tracks each stage.

What This Means for You

Employees: put the request in writing, expect a written answer, and check the payment against both the OWP and AWE figures rather than assuming payroll used the right one.

Employers: decide your position and publish it. If you will consider requests, define who approves them, how quickly you respond, and how the payment is calculated. If you will not, say so in the policy — that is a valid answer, and it removes any suggestion of pressure. Then audit last year’s cash-ups against the one-week cap and the greater-of rule.

For the wider picture, see our guide to annual holidays in New Zealand. Australian readers should note the rules differ substantially across the Tasman — see cashing out annual leave in Australia.

Leave Balance records cash-ups against the correct entitlement year and keeps the balance, the payment and the date in one auditable place, so the one-week cap is enforced by the system rather than by memory. Flat $10/month, unlimited employees, 14-day free trial.

This article is general information about New Zealand employment law as at July 2026 and is not legal advice. Check Employment New Zealand or take advice for your situation.