By Brett Ransley • 21 Nov 2025
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Paying casual employees correctly in New Zealand largely comes down to understanding how holiday pay works. Most casual staff receive 8% holiday pay, usually paid on top of their hourly rate. This guide breaks down what that means in practice and how to avoid common mistakes.
For full details on leave and holidays, see Employment New Zealand – Leave and holidays .
Why Casual Pay Is Different
Because casual employees do not have guaranteed or regular hours, it often does not make sense to give them four weeks’ paid annual leave in the same way as permanent staff. Instead, they usually receive holiday pay on a “pay-as-you-go” basis.
The standard approach for genuine casual employees is to pay an additional 8% of their gross earnings as holiday pay.
What Is the 8% Holiday Pay Rule?
Under the Holidays Act 2003, employees are entitled to at least four weeks’ annual holidays after 12 months’ continuous employment. For casual employees who work intermittently, it is often more practical to pay this as 8% of their gross earnings instead of accruing leave.
- 8% is calculated on gross earnings (before tax, including certain allowances and commissions)
- It should be clearly shown as “holiday pay” on the payslip
- It should be paid regularly (usually every pay cycle)
When Should You Use 8% Pay-As-You-Go?
Pay-as-you-go holiday pay is generally appropriate when:
- The employee is genuinely casual, with irregular or intermittent work
- There is no ongoing expectation of employment after each engagement
- The pattern of work is too variable to sensibly accrue annual leave
For more structured or ongoing roles, paying and accruing annual leave in the usual way may be more appropriate.
How to Calculate 8% Holiday Pay
The basic formula for holiday pay on a casual basis is:
Example 1 – Simple Weekly Calculation
A casual employee works 15 hours in a week at $X per hour.
- Gross earnings: 15 × $X = $Y
- Holiday pay: $Y × 0.08
On the payslip, you would show both the normal wages and the separate holiday pay amount.
Example 2 – Irregular Hours Over a Fortnight
Week 1: 10 hours, Week 2: 22 hours, all at the same hourly rate.
- Gross earnings fortnight: (10 × $X) + (22 × $X) = $Z
- Holiday pay: $Z × 0.08
What Counts as “Gross Earnings”?
Gross earnings for holiday pay purposes include more than just basic hourly wages. They usually include:
- Hourly wages or salary
- Overtime payments
- Regular bonuses and commissions
- Some allowances that are part of normal pay
For a detailed description of what is included and excluded, refer to Employment New Zealand’s guidance on calculating annual holidays .
Public Holidays and Casual Employees
Casual employees may be entitled to paid public holidays if the public holiday falls on a day that would otherwise be an ordinary working day for them.
Employment New Zealand provides guidance on public holidays here: Public holidays – Employment New Zealand.
Determining whether a day is “otherwise a working day” can be tricky for irregular casual work. You will need to look at patterns of work, rosters, and expectations between you and the employee.
Common Mistakes Employers Make
- Paying 8% holiday pay and also letting the employee accrue annual leave
- Not clearly labelling holiday pay on the payslip
- Using 8% for employees who are not genuinely casual and work regular hours
- Calculating 8% on net pay instead of gross earnings
Staying Compliant With Casual Pay
To keep things simple and compliant:
- Clearly explain holiday pay in the casual employment agreement
- Show 8% holiday pay as a separate line on payslips
- Review patterns of work regularly – if a role is no longer truly casual, consider moving to a different employment type
- Make sure your payroll system is correctly set up to handle casual employees
You can find a general overview of minimum wage and pay requirements here: Minimum wage – Employment New Zealand.