Annual Leave Cash-Out Calculator NZ 2026
Cashing up annual leave is one of the few parts of the Holidays Act that is genuinely simple: you may ask to convert up to one week a year into money, your employer may say no, and nobody may pressure you into it. The Employment Leave Bill would change the limit from a fixed week to a proportion, 25 per cent of whatever balance you hold, which matters mainly to people who have accumulated a lot of leave and cannot realistically take it all. What neither system changes is the arithmetic underneath: a week cashed up is a week you do not get to rest, taxed as an extra pay, and valued at today's rate rather than the rate you would be on when you eventually took it. This calculator shows what you can cash under each rule and what it is actually worth.
What you can cash, and what it is worth
The two rules across different balances
At your weekly pay. The proposed rule only beats the current one once your balance passes four weeks.
| Balance | One week limit | 25% limit | Which is more |
|---|
Why 25 per cent beats one week only for large balances
The two rules cross at four weeks. On a balance of four weeks, 25 per cent is exactly one week and the rules give the same answer. Below that, the fixed week is more generous: someone with two weeks accumulated can cash a whole week now but only half a week under the proportional rule. Above four weeks the proportional rule pulls ahead, and it keeps pulling ahead, which is the point of the change. The people the reform is aimed at are those carrying six, eight or ten weeks of leave they have never been able to take, for whom a one week annual limit means the balance can never meaningfully be reduced by cashing up.
A cash-out is taxed as an extra pay
This surprises people who expect it to be taxed like a normal week's wages. Cashed-up leave is an extra pay for PAYE purposes, in the same category as a bonus, so the tax is calculated on your annualised income rather than through the ordinary weekly tables. For most people the practical effect is a higher deduction than they expected on the day, though it evens out at the end of the year. It also counts as income for the year, and it is one of the payments included in total remuneration for the $200,000 personal grievance threshold.
The reason to keep the leave
Leave that stays on your balance is paid at the rate you are on when you take it, not the rate you were on when you accrued it. A balance carried through a pay rise is worth more afterwards, which is a quiet argument for holding it. The stronger argument is the obvious one: annual leave exists so that people rest, and a workplace where employees routinely cash up because they cannot get time off has a staffing problem rather than a leave problem. If the reason for cashing up is that the money is needed, that is a pay conversation, not a leave one.
Worked example
An employee has 6.0 weeks of annual leave and earns $1,600.00 a week, so the whole balance is worth $9,600.00 gross. Under the Holidays Act 2003 they can request to cash up 1.0 week, worth $1,600.00, leaving 5.0 weeks.
Under the proposed 25 per cent rule they could cash up 1.5 weeks, worth $2,400.00, leaving 4.5 weeks. The proposal is $800.00 better for this balance. Both figures are gross, and the tax on a cash-out is deducted at the extra pay rate.
How this is calculated
If your balance is recorded in hours it is converted to weeks by dividing by your hours a week, and the reverse if recorded in weeks. The current limit is the lesser of one week and your balance, since you cannot cash up more than you hold. The proposed limit is 25 per cent of the balance. Each is valued at your weekly gross pay, and the hourly equivalent is weekly pay divided by hours a week. Remaining balance is the balance less the amount cashed under each rule. All figures are gross, before the extra pay PAYE deduction.
Official sources
- Cashing up annual holidays, Employment New Zealand
- Holidays Act 2003, legislation.govt.nz
- Holidays Act reform: Employment Leave Bill, MBIE
- Lump sum payments, Inland Revenue, for the extra pay tax treatment
Related NZ calculators
- Lump Sum and Redundancy Tax Calculator for the extra pay tax on a cash-out
- Annual Leave Calculator for your entitlement and balance
- Hourly Leave Accrual Calculator for balances under the proposed system
- Holidays Act vs Employment Leave Bill Comparator for everything else that changes
- Holiday Pay Calculator for how leave is paid when taken
- Annual Leave Explained
This page explains how the law works and estimates figures from what you enter. It cannot tell you what will happen in your situation, because employment outcomes turn on facts, evidence and the wording of your own agreement. Nothing here creates a lawyer and client relationship.
It has not been reviewed by a lawyer. The legal descriptions are drawn from Employment New Zealand, MBIE and Inland Revenue and were checked against those sources on 7 August 2026. They are our reading of published guidance, not a practitioner's opinion, and parts of this area are very new: the Employment Relations Amendment Act 2026 has been in force only since 21 February 2026 and there is little case law on how it will be applied.
The 25 per cent limit is proposed and not in force. The limit that applies today is one week a year.
Before you act, get advice. A community law centre is free. Employment New Zealand provides free information and mediation. An employment lawyer will tell you things no calculator can. Time limits are short and unforgiving: a personal grievance must generally be raised within 90 days, so seek advice early rather than waiting for certainty.