Who can be paid the 8% pay-as-you-go holiday pay?

Two types of employees: (1) Casual employees whose work is genuinely intermittent or irregular - making it impractical to predict or schedule annual leave; OR (2) Fixed-term employees on a contract of less than 12 months. The arrangement must be agreed in writing in the employment agreement, the worker's payslip must clearly identify the 8% holiday pay portion, and it must be paid each pay period. Permanent employees with regular hours CANNOT be paid 8% PAYG.

What is the 'genuine intermittent work' test?

MBIE applies a strict test: work must be GENUINELY casual or intermittent. Indicators of genuine casual work: no fixed roster, work offered on a job-by-job basis, employee can refuse work, no expectation of ongoing work, irregular hours from week to week. Indicators that the relationship is NOT genuinely casual (and the employee should be permanent on standard 4-weeks leave): regular weekly hours, fixed roster, expectation of continuing work, MBIE has prosecuted employers using 8% PAYG to disguise permanent employment.

Is 8% the same as 4 weeks annual leave?

Yes mathematically: 4 weeks of leave out of 52 weeks = 7.69% (often rounded to 8%). The 8% figure compensates the employee in cash for not accruing leave entitlement they wouldn't be able to use anyway (because the employment relationship ends or is intermittent). PAYG employees still get public holidays and sick leave - only the annual leave is converted to the 8% loading.

What about KiwiSaver and other entitlements for PAYG employees?

The 8% PAYG holiday pay is part of gross earnings for: KiwiSaver contributions (employee and employer both calculated on gross including the 8%), PAYE/income tax, ACC earners' levy, and student loan repayments. Public holidays still apply if worked or if it's an otherwise working day. Sick leave entitlements still apply (10 days from day one of employment). The only thing the 8% replaces is the annual leave entitlement.

NZ 8% Pay-As-You-Go Holiday Pay Calculator

For casual and fixed-term workers, NZ's Holidays Act 2003 allows employers to add 8% holiday pay loading to each pay period instead of accruing 4 weeks of annual leave. This calculator works out the correct amount, tests eligibility against MBIE's "genuine intermittent work" test, and warns about the common mistake of mis-applying 8% PAYG to disguised permanent employees (which IRD and MBIE actively prosecute).

Updated April 2026 Implements section 28 of the Holidays Act 2003.

When 8% PAYG is allowed

Section 28 of the Holidays Act 2003 allows the 8% pay-as-you-go arrangement only for two specific employee types:

Casual employees with genuinely intermittent or irregular work. The defining feature is unpredictability - hours vary, the employee can refuse work, no fixed roster, no expectation of continuing employment.
Fixed-term employees on a contract of less than 12 months. The fixed-term arrangement must be genuine (not disguised permanent employment).

The three formal requirements

The 8% PAYG arrangement must be agreed IN WRITING in the employment agreement
The 8% holiday pay portion must be IDENTIFIED SEPARATELY on the employee's payslip
The 8% must be paid in EACH pay period (not lumped together at end of contract)

The "genuine intermittent" test

MBIE applies a strict test for casual workers. If the actual working pattern looks regular (similar hours each week, fixed shifts, expected to keep working), the employee is permanent regardless of what the contract says. MBIE and IRD have actively prosecuted employers who use 8% PAYG to avoid the cost of accruing proper annual leave for what are effectively permanent employees.

What 8% replaces (and doesn't replace)

Replaces: 4-week annual leave entitlement (mathematically 4/52 = 7.69%, rounded to 8%)
Does NOT replace: Public holidays, sick leave (10 days/year from day one), bereavement leave, parental leave entitlement

PAYE and KiwiSaver on the 8%

The 8% loading is part of gross earnings. PAYE, ACC earners' levy, KiwiSaver contributions (employee and employer), ESCT, and student loan repayments all apply to the GROSS amount including the 8%. So the 8% effectively grosses up by your tax rate before reaching the employee's bank account.

Sources

Related calculators

Holiday Pay Calculator (OWP vs AWE) — for permanent employees
Annual Leave Calculator — entitlement and accrual
Final Pay Calculator — termination payouts
PAYE Calculator — tax on gross including 8%