Annual Leave Payout When Leaving a Job in NZ

Final pay has more than one annual-leave layer

When a job ends, final pay includes wages still owing, holiday and leave payments owing, and other contractual amounts. For someone who has passed an annual-holiday anniversary, payroll first values any unused annual holidays they are already entitled to at the greater of OWP or AWE.

Payroll then deals with the part-year since the last anniversary. Under the current rules, that usually involves 8% of applicable gross earnings since that anniversary, including relevant final-pay amounts, less annual holidays taken in advance and pay-as-you-go amounts already paid.

Leaving before the first anniversary works differently

If employment ends before the employee becomes entitled to annual holidays, the current calculation generally starts with 8% of gross earnings from the beginning of employment. Amounts already paid as leave in advance or valid pay-as-you-go holiday pay are deducted.

That is why “my balance says 7.4 days” may not translate into 7.4 days multiplied by one hourly rate. The payroll display may be an estimate, while final pay follows the statutory calculation for the employee’s stage of employment.

Related: annual leave pay calculation Related: annual leave entitlements Related: public holidays during annual leave

Public holidays can extend the payout

Unused annual holidays already entitled are treated as though they were taken immediately after employment ends. If a public holiday falls inside that notional period on a day the employee would otherwise have worked, payment for that public holiday can also be due.

For example, a Monday-to-Friday employee finishing just before Christmas with entitled leave remaining may need Christmas and Boxing Day assessed. Payroll should extend the notional leave period for qualifying public holidays and check again until the entitled leave is exhausted.

Run a practical final-pay check

Collect the final payslip, employment anniversary date, current leave record, last 12 months of gross earnings and any leave taken in advance. Check wages to the final day, unused entitled annual holidays, the part-year 8% calculation, alternative holidays and any qualifying public holidays.

Unused sick or bereavement leave does not have a general legal payout entitlement, although an employment agreement can provide one. Keep those balances separate from annual holidays and alternative holidays.

Ask for the breakdown, not just the total

A large final payment can still be wrong, and a smaller-than-expected payment is not automatically wrong. Ask payroll to show OWP, AWE, entitled leave remaining, gross earnings used for the 8% amount, deductions for prior leave and the public-holiday check.

Final leave and holiday pay must be paid on or before the payday for the final pay period. If the explanation does not resolve a difference, Employment New Zealand provides help for unpaid wages and holiday-pay concerns.