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Under New Zealand’s Holidays Act 2003, once an employee completes 12 months’ continuous service, they become entitled to four weeks’ paid annual holidays. On termination, you must pay any unused entitled annual holidays at the higher of ordinary weekly pay or average weekly earnings.
For the extra three months after the anniversary, the Act does not grant a “fifth week”. Instead, it requires a cash amount equal to 8% of gross earnings earned since the last annual-leave anniversary date, less any amounts already paid for leave taken in advance or on a pay-as-you-go basis.
The payslip line “Annual holidays (estimated leave in advance)” is a borrowing mechanism, not an extra entitlement. If any leave was taken in advance, it is set off in the final-pay calculation and is not added on top.
So the usual lawful outcome here is: four weeks of unused entitled annual holidays (paid at the higher of ordinary weekly pay or average weekly earnings), plus 8% of gross earnings since the last anniversary, minus any leave-in-advance or pay-as-you-go already paid. That is not an automatic fifth week.
To lock this down, check the employment agreement for any entitlement above the statutory minimum, and pull payroll for (1) the unused entitled leave balance, (2) any leave-in-advance entries since the last anniversary, and (3) gross earnings for the 8% calculation. |
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