How is holiday pay calculated in NZ?

For annual leave taken, the Holidays Act 2003 requires you to pay the GREATER of: (1) Ordinary Weekly Pay (OWP) - what the employee would normally have earned that week; or (2) Average Weekly Earnings (AWE) - gross earnings in the past 52 weeks divided by 52. The 'greater of' rule protects employees with variable income (commission earners, those who do regular overtime) by ensuring their leave pay reflects actual earning patterns, not just base salary.

What counts as gross earnings for AWE?

Gross earnings include all payments made to the employee for work performed: salary, wages, allowances (other than reimbursement allowances), commission, productivity/incentive bonuses, overtime, and the cash value of board and lodging. Excluded: discretionary bonuses (only if genuinely discretionary, not contractual), reimbursing payments, and weekly compensation paid by ACC. Holiday pay itself is included in subsequent AWE calculations.

What is the public holiday alternative day rule?

If an employee works on a public holiday that would otherwise be a working day for them, they're entitled to: (1) time-and-a-half for the hours worked, AND (2) an alternative holiday (a paid day off taken later). If the public holiday is NOT an otherwise working day, they only get the time-and-a-half for hours worked, no alternative day. If they don't work on a public holiday but it's an otherwise working day, they receive their relevant daily pay for the day.

How is leave calculated when an employee leaves?

On termination, the employee is paid out for: (1) accrued but untaken annual leave (calculated using the greater of OWP or AWE for full weeks accrued), PLUS (2) 8% of gross earnings since their last anniversary date for the partial year being accrued (this is the 8% accrual rule for unused entitlement during the current accrual period). Public holidays falling within the notice period are paid as normal. Sick leave is NOT paid out on termination.

NZ Holiday Pay Calculator (Holidays Act 2003)

This calculator works out how much holiday pay is owed under the Holidays Act 2003, which requires many leave and public holiday payments to be calculated at the greater of two rates rather than a single flat rate. Start by choosing what you are calculating: annual leave taken, a public holiday worked on an otherwise working day, a public holiday worked on a day that would not normally be worked, a public holiday not worked, or a termination leave payout. You then enter your Ordinary Weekly Pay (your normal weekly earnings) and total gross earnings over the past 52 weeks, which the calculator uses to work out Average Weekly Earnings and compare the two, paying out whichever is higher. Depending on the scenario chosen, you also enter the leave weeks, the hours worked and hourly rate for a time-and-a-half calculation, or the untaken leave weeks and earnings since your last work anniversary for a termination payout. The results show OWP, AWE, the greater-of rate, and the final payment amount, plus whether an alternative day off applies for a public holiday worked, or the accrued leave and 8% accrual split for a termination payout. This is a planning estimate based on the figures you supply; PAYE, ACC levies and KiwiSaver still apply, and complex or disputed cases should be checked against MBIE guidance or a payroll professional.

Updated April 2026 Implements Holidays Act 2003 OWP/AWE comparison and public holiday rules.

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Step 1: Type of payment

What are you calculating?

Step 2: Pay rates (for OWP/AWE comparison)

Ordinary Weekly Pay (OWP) - normal weekly earnings

What the employee would have earned this week if working their normal pattern. Salary divided by weeks, or hourly rate × normal hours. Total gross earnings in past 52 weeks

Includes salary, wages, allowances, commission, overtime, productivity bonuses, and prior holiday pay. Excludes reimbursements, ACC weekly comp, and genuinely discretionary bonuses.

Number of leave weeks being paid

weeks

The "greater of" rule explained

The Holidays Act 2003 requires that annual leave be paid at the greater of two calculated weekly rates:

Ordinary Weekly Pay (OWP): What the employee would normally earn in a week working their usual pattern. For salary employees, this is annual salary ÷ 52. For hourly employees, normal hours × hourly rate.
Average Weekly Earnings (AWE): Gross earnings over the previous 52 weeks ÷ 52. Captures variable pay like commission, overtime, and productivity bonuses.

Pay the higher figure. For employees with stable salary and no variable pay, OWP and AWE are usually equal. For commission earners, sales staff, or those who do regular overtime, AWE is typically higher and the rule has real teeth.

Public holiday rules

Worked + otherwise working day: Time-and-a-half for hours worked + an alternative day off (paid)
Worked + NOT otherwise working day: Time-and-a-half for hours worked, no alternative day
Not worked + otherwise working day: Relevant daily pay (greater of average daily pay or actual day's pay)
Not worked + NOT otherwise working day: No payment (just a normal day off)

Termination payout (8% accrual)

On termination, you owe two amounts: (1) accrued but untaken annual leave (full weeks earned) at the greater of OWP or AWE; PLUS (2) 8% of gross earnings since the last anniversary date for the current accrual period. The 8% covers leave accrued but not yet "earned" as a full annual entitlement.

What counts as gross earnings

Includes: salary, wages, allowances (except reimbursement), commission, productivity bonuses, overtime, board and lodging cash value, payments for time NOT worked but contracted for, prior holiday pay. Excludes: discretionary bonuses (genuine discretion only), reimbursing allowances, weekly ACC compensation, and ex gratia/redundancy payments.

Sources

Related calculators

NZ Annual Leave Calculator - entitlement and accrual
8% Pay-As-You-Go Calculator - for casuals
Final Pay Calculator - complete termination calculation
PAYE Calculator - tax on holiday pay

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Reviewed and maintained. Last reviewed 2026-07-02 and checked on a twice-monthly cycle against IRD, RBNZ and Stats NZ. How we keep data current.