Cashing out annual leave in New Zealand: how much you can cash out and the rules
New Zealand employees can ask their employer to cash up to 1 week of their 4-week annual holiday entitlement each year, exchanging it for pay instead of taking it as time off, under section 28A of the Holidays Act 2003 (New Zealand Legislation, retrieved 9 September 2026). The request must be in writing, and your employer is legally allowed to decline it.
The limit and how requests work
Cashing up is capped and voluntary on both sides: an employee cannot be forced to cash up leave, and an employer cannot be forced to agree. Employment New Zealand (retrieved 9 September 2026) sets out the mechanics.
| Rule | What applies |
|---|---|
| Maximum cashed up per year | 1 week of the 4-week minimum annual holiday entitlement |
| How to request | In writing, either as one request for the full week or several smaller requests until the week is used |
| Can an employer refuse? | Yes, and they do not have to give a reason |
| When can it be requested? | Only once the underlying annual holidays have actually vested |
| Is there a time limit to respond? | Employers must consider a request within a reasonable time and confirm the decision in writing |
(Holidays Act 2003, s28A; Employment New Zealand, Cashing-up annual holidays, retrieved 9 September 2026.)
How much annual leave can you cash out in NZ?
You can cash up a maximum of 1 week of your 4-week minimum annual holiday entitlement in each entitlement year, under section 28A of the Holidays Act 2003 (New Zealand Legislation, retrieved 9 September 2026). You can make one request for the full week, or several smaller requests that add up to a week, but the total cashed up in a single 12-month entitlement period cannot exceed that 1-week cap.
Can my employer refuse to let me cash out annual leave?
Yes. Employers can decline a cash-up request entirely, and they are not required to give a reason for saying no, under section 28B of the Holidays Act 2003 (New Zealand Legislation, retrieved 9 September 2026). They must, however, consider the request within a reasonable time and confirm their decision to you in writing.
Is cashed-out annual leave taxed differently?
No. Cashed-up annual holiday pay is taxed the same way as any other pay through PAYE; there is no separate tax treatment or exemption for cashing up leave. It is simply paid to you as part of your normal pay, calculated under the same annual holiday pay rules as leave taken as time off. Our annual leave pay calculator explainer covers how that payment amount is worked out.
Can you cash out annual leave more than once a year?
You can make multiple separate requests within the same entitlement year, but they must together add up to no more than 1 week in total. Once you have cashed up the full week for that entitlement year, you cannot cash up any further annual holidays until your next anniversary generates a new entitlement, under section 28A of the Holidays Act 2003 (New Zealand Legislation, retrieved 9 September 2026).
Do you have to use some leave before you're allowed to cash any out?
No, there is no requirement to take a minimum amount of time off before cashing up part of your entitlement. The only condition is that the underlying annual holidays must have already vested; you cannot cash up leave you have not yet become entitled to, even if your employer would otherwise be willing to pay it out (Employment New Zealand, Cashing-up annual holidays, retrieved 9 September 2026).
When exactly can I make a cash-up request?
Only after your 4-week annual holiday entitlement has actually arisen, on your anniversary date. For example, an employee who starts on 1 June 2025 becomes entitled to their first 4 weeks on 1 June 2026, and can request to cash up to 1 week of that entitlement at any point in the following 12-month period, running from 1 June 2026 to 31 May 2027 (Employment New Zealand, Cashing-up annual holidays, retrieved 9 September 2026).
Can my employer make cashing up a condition of my job?
No. Employers and employees must not discuss a requirement to cash up as part of wage or salary negotiations, and asking for or receiving a cash-up cannot be made a term or condition of employment, whether agreed verbally or in writing, under section 28A of the Holidays Act 2003 (New Zealand Legislation, retrieved 9 September 2026). An employer can, however, include a process for making a cash-up request in the employment agreement itself.
Can an employer have a blanket no-cash-up policy?
Yes. An employer can set a workplace policy stating that cash-up requests will not be considered at all, applying to the whole workplace or just part of it. If such a policy exists, it removes the employer's obligation to consider individual requests case by case, but the policy itself must not allow more than 1 week to be cashed up, and must not restrict how many requests an employee can make within that 1-week cap (Employment New Zealand, Cashing-up annual holidays, retrieved 9 September 2026).
Can I cash up more than 1 week if my employer agrees?
No. The 1-week cap is a statutory maximum under section 28A of the Holidays Act 2003, not a floor an employer can choose to exceed. An employer offering more than the 4-week statutory minimum entitlement in the first place, for example 5 or 6 weeks, is still limited to cashing up a maximum of 1 week of the minimum 4-week portion, unless the extra contractual weeks carry their own separate cash-up terms in the employment agreement.
What if I need cash urgently but my employer says no?
If your employer declines a cash-up request, your remaining options are to take the annual holidays as time off, keep the balance banked for later, or look at other short-term financial support. If the shortfall relates to essential living costs, Work and Income's Temporary Additional Support is a separate, income and asset-tested payment worth checking, and if the pressure is from an illness or reduced income more broadly, comparing income protection cover is the longer-term fix.
Is cashing up the same as the 8% pay-as-you-go rule?
No, they are different mechanisms for different groups of employees. Cashing up under section 28A applies to any employee who has an ordinary 4-week annual holiday entitlement and simply wants to convert part of it to pay. The 8% pay-as-you-go rule under section 28 is a separate arrangement, only available to employees on a fixed-term agreement under 12 months or those who work so irregularly that providing scheduled leave is impractical; see our annual leave entitlement guide for the full 8% rule.
Can casual or part-time employees cash up annual leave?
Casual employees who genuinely work so irregularly that they receive 8% pay-as-you-go holiday pay instead of a 4-week entitlement have nothing to cash up, since there is no banked leave balance to draw from. A part-time employee with a standard 4-week entitlement, calculated against their own working week, can request to cash up 1 week of it in exactly the same way as a full-time employee.
What happens to a cash-up request if I resign before it's paid?
If you resign after making a cash-up request but before it has been paid, the timing depends on your employer's payroll cycle and any agreement you reached about when it would be paid. In practice, most of this becomes moot on resignation, because any remaining unused annual holidays, cashed up or not, are paid out in full in your final pay under the ordinary final pay rules; see our annual leave entitlement guide for how final pay is calculated.
How cashed-up leave is paid
Cashed-up annual holidays are paid using the same formula as annual holidays taken as time off, not a separate cash-out rate.
| Step | What happens |
|---|---|
| 1. Request | Employee requests, in writing, to cash up part or all of 1 week |
| 2. Employer decision | Employer considers within a reasonable time; can approve, decline, or apply a blanket no-cash-up policy |
| 3. Calculation | Paid at the higher of ordinary weekly pay or average weekly earnings, the same formula as leave taken as time off |
| 4. Payment | Paid with your normal pay, taxed through PAYE like any other pay |
(Holidays Act 2003, ss21, 28A, 28B; Employment New Zealand, Cashing-up annual holidays, retrieved 9 September 2026. See our annual leave calculator explainer for how OWP and AWE themselves are worked out.)
Why the cap exists
The purpose of annual holidays under the Holidays Act 2003 is genuine rest, so the cash-up mechanism deliberately limits how much of that entitlement can be converted to money rather than time off. The remaining 3 weeks of the 4-week minimum can never be cashed up under any circumstance, regardless of what an employer or employee might prefer.
| What can be cashed up | What cannot |
|---|---|
| Up to 1 week of the 4-week statutory minimum, per entitlement year | The remaining 3 weeks of the statutory minimum |
| Extra contractual leave, if the employment agreement specifically allows it | Sick leave, bereavement leave or family violence leave balances |
| Vested entitlement only | Leave not yet accrued or entitled |
(Employment New Zealand, Cashing-up annual holidays, retrieved 9 September 2026.)
What's changing
Cashing up changes under the Employment Leave Act 2026, due to replace the Holidays Act from 6 August 2028. Once annual leave moves to hourly accrual, employees will be able to request to cash up to 25% of their annual leave balance in each 12-month period, measured from their last start-date anniversary, rather than the current flat 1-week cap (Ministry of Business, Innovation and Employment, Key changes to the employment leave system, retrieved 9 September 2026). Nothing changes for the rules on this page until then. See our employment leave law changes page for the full picture.
Cashing up is one of several ways your annual leave balance can be used; our guides to annual leave entitlement in NZ and how annual leave pay is calculated cover how the underlying entitlement builds and is paid, and public holiday pay and long service leave round out this cluster on the leave entitlements hub. If cashing up is being considered because of a redundancy, our redundancy pay in NZ guide covers the separate payout that applies instead, and Jobseeker Support is the income support option if you end up out of work.
If the reason you are considering cashing up leave is an illness or reduced income rather than a one-off expense, our sick leave entitlement in NZ and financial help when you're sick guides cover the other support available, and Temporary Additional Support and the wider Work and Income benefits hub cover income and asset-tested help with essential costs. Bereavement leave in NZ is the equivalent statutory guide for time off around a death, which cannot be cashed up under any circumstance.
Financial advice is provided by Craig Smith Business Services Limited, trading as Smiths Insurance & KiwiSaver, a licensed Financial Advice Provider (FSP712931). QuoteHub is a trading name. Start a free comparison if you would like a licensed adviser to review your own cover.
Adviser's view
QuoteHub's read is that most people misjudge the timing rule, not the amount: cashing up feels like it should work the way overtime does, paid whenever asked, but a request can only be made after the underlying week of annual leave has actually become due, which is why a brand-new employee cannot cash up leave they have not yet earned.
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Cite this page QuoteHub NZ (2026). Cashing Out Annual Leave in NZ: Rules and Limits. www.quotehub.co.nz/guides/leave-entitlements/annual-leave-cash-out-nz. Updated 2026-09-09.
References
- Holidays Act 2003, section 28A (Employee may request portion of annual holidays be paid out)
- Holidays Act 2003, section 28B (Payment for annual holidays paid out)
- Employment New Zealand: Cashing-up annual holidays
- Employment New Zealand: Taking annual holidays
- Ministry of Business, Innovation and Employment: Key changes to the employment leave system (PDF)
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