Cashing in holiday leave

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Cashing in holiday leave

November 28, 2012

As we are getting closer to Chrsitmas, money (or lack of it!) is unfortunately a topic on many peoples minds. It can be difficult to juggle all the expenses like Christmas presents and family holidays so many employees are deciding to cash in their holiday leave to get more dollars in hand. As this is quite a new concept in New Zealand many employers are struggling to get their heads around it.

How it works:

Employees are entitled to request to cash in up to one week of their 4 week annual leave entitlement. This means that they would only take 3 weeks holiday and would get paid out the cash value of their 4th holiday week.

From a tax perspective the cashed in holiday leave would be treated as extra pay or a bonus and PAYE and other deductions would be calculated accordingly.

Legalities:

An Employee needs to submit a request in writing to their Employer requesting to cash in a week (or less) of their accrued holiday leave. They need to have been working for the 12 month period prior to the request and obviously have sufficient leave owing.

Employers cannot request that staff cash in their holidays and it cannot be included in an employment contract or negotiations. Employers can institute a company policy in consultation with staff  that they will not consider requests to cash up holidays, they may wish to do this if for example they have an annual closedown where the company shuts up shop for 4 weeks over Christmas and New Year and staff have to take their full leave during this time.

Need help with your payroll and keeping on top of the legalities?  Give us a call on 0800 88 70 70

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