Quick answer
In New Zealand, an employee's final pay is due on or before the pay day of their final pay period. It includes wages for hours worked, the cash value of any unused annual holidays, 8% of gross earnings since their last anniversary date, unused alternative holidays and anything else owed under their agreement. A long-serving employee with a large leave balance can turn one pay run into several weeks' wages, so work out the figure on the day they resign.
Key points
- Final pay is due on or before the pay day of the final pay period, not some later date.
- Unused annual holidays are paid at the higher of ordinary weekly pay or average weekly earnings.
- Holiday pay not yet earned as leave is paid at 8% of gross earnings since the last anniversary date.
- Holiday pay in a final pay is usually taxed as a lump sum, and goes through payday filing like any other pay.
- The notice period is your window: you have at least one full pay cycle to line up the cash.
A resignation letter lands on your desk on a Monday morning. Before you think about the farewell morning tea or the job ad, there’s one figure worth working out by the end of that day: the final pay. In New Zealand it has a firm deadline, it often contains far more than a normal week’s wages, and it lands in the same pay run as everyone else’s. Here’s how to get the number right and have the money sitting there when it’s due.
When is final pay due?
Employment New Zealand puts it plainly: the final leave and holiday payment “must be paid on or before the pay day of the final pay period”. The final wages and any other money owed are usually paid at the same time.
So if your staff are paid weekly on Wednesdays and the employee’s last day is a Friday, the deadline is the following Wednesday — the normal pay day for the period in which they finished. There’s no extra month to sort it out. The notice period is your real preparation time.
| If the notice period is… | …and you pay | You have roughly |
|---|---|---|
| 1 week | weekly | one pay run to plan |
| 2 weeks | fortnightly | one pay run to plan |
| 4 weeks | weekly | four pay runs to plan |
| 4 weeks | monthly | until the next monthly pay day |
Check the employment agreement for the notice period on the day the letter arrives. That date tells you how many hours you have.
What goes into a final pay?
Employment New Zealand lists three broad parts: wages for hours worked, leave and holiday payments owed, and other payments owed under the agreement or a leaving package. In practice, a final pay can include:
- Wages to the last day — ordinary hours, overtime and allowances for the final period.
- Unused annual holidays the employee is entitled to — leave they’ve already earned by reaching an anniversary but haven’t taken.
- 8% of gross earnings since the last anniversary date — the holiday pay building up towards the next entitlement, less anything already paid in advance or as pay-as-you-go holiday pay.
- Unused alternative holidays — days in lieu from working on public holidays.
- Public holidays that fall after the last day — in some cases (more on this below).
- Anything else owed — commission, a bonus the agreement says is payable, or an agreed leaving payment.
Items 2 to 5 are where the surprises come from.
Why is the holiday pay part so much bigger than expected?
Three reasons.
The rate is the higher of two figures. Unused annual holidays the employee is entitled to are paid at whichever is higher: their ordinary weekly pay, or their average weekly earnings for the 12 months before the end of the last pay period. Someone who worked plenty of overtime or earned commission in the past year will often be paid out at the average, not the base rate.
The 8% includes the final pay itself. Employment New Zealand notes that the gross earnings used for the 8% calculation include the other parts of the final pay. Paying out a large leave balance pushes the 8% figure up.
Alternative holidays are paid at today’s rate. Unused days in lieu are paid at the employee’s relevant daily pay for their last day, not the rate when they earned them. If they’ve had a pay rise since, it costs more.
Do public holidays after the last day get paid?
Sometimes, and it catches owners out around Christmas and Easter. Employment New Zealand’s approach is to treat the employee’s unused entitled annual holidays as if they were taken immediately after their last day of work. If a public holiday falls inside that notional leave period and would otherwise have been a working day for them, it’s paid as well — and that extra day can push the period out further.
Example: someone with three weeks of unused leave who finishes on 18 December could pick up all four Christmas and New Year public holidays in their final pay — in 2026–27, Boxing Day and 2 January fall on Saturdays, so they’re observed on the following Mondays. With the summer shutdown already squeezing December cash, that matters.
How is the tax worked out, and what about KiwiSaver?
Inland Revenue says holiday pay paid out at the end of employment is “usually taxed as a lump sum payment”. Your payroll software applies the extra pay rules, so the PAYE on that pay will look different from a normal week. Two practical points:
- PAYE is still payable to Inland Revenue on the usual due date, and the pay goes through payday filing like any other — including the employee’s finish date.
- KiwiSaver may apply. Inland Revenue says the employer contribution, currently a minimum of 3.5%, is calculated on gross salary or wages including “most other before-tax payments”. Check how your payroll system treats the leave payout so the cost isn’t understated. Our KiwiSaver payroll guide covers the 2026 and 2028 step-ups.
The cash goes out in two stages: the net pay to the employee on pay day, and the PAYE, KiwiSaver and ESCT to Inland Revenue on your normal PAYE due date. Plan for both.
Illustrative example: a Nelson joinery workshop
This example is illustrative only — the figures are made up to show the method.
A joiner with six years’ service resigns on a Monday with two weeks’ notice. Pay is weekly. Ordinary weekly pay is $1,300, but with regular overtime, average weekly earnings over the past year come to $1,450.
| Part of the final pay | Rough gross figure |
|---|---|
| Two weeks’ wages to the last day | $2,900 |
| Four weeks of unused entitled leave at average weekly earnings | $5,800 |
| 8% of gross earnings since the last anniversary (about $40,000 including the payout) | $3,200 |
| One unused alternative holiday | $290 |
| Total gross final pay | about $12,190 |
On top of that sits employer KiwiSaver and ESCT, and the normal wages for the rest of the team that same week. The owner had budgeted for “a couple of weeks’ pay”. The real figure was more than nine weeks of this employee’s ordinary wages, landing in one pay run. Because the owner did the sum on resignation day, there were two weeks to arrange the cash instead of finding out the night before pay day.
What should I do on the day someone resigns?
A short checklist for the first 24 hours:
- Confirm the notice period in the employment agreement and write down the last day of work.
- Find the pay day of the final pay period. That’s your deadline.
- Pull the leave balance, anniversary date, gross earnings since that date and any alternative holidays owed.
- Check for public holidays that could fall within the notional leave period after the last day.
- Ask payroll for an estimated final pay, including employer KiwiSaver and ESCT.
- Compare it with the bank balance you expect on that pay day, after the rest of the wages, GST and suppliers.
- If there’s a gap, decide this week how you’ll close it.
If the gap is real, our payroll due this week page explains what can move in a few days. If you’d like to see what’s possible now, a 60-second enquiry won’t touch your credit file.
Can the employee use up leave during their notice period?
Sometimes, and it can smooth the cash. Employment New Zealand says that if you and the employee can’t agree on when annual holidays are taken, you can require them to be taken with at least 14 days’ notice. Many owners simply agree with the departing employee that they’ll take some leave before they go — it reduces the payout and spreads the cost across normal pay runs.
Be careful here. The employment agreement, the length of notice and how leave and notice overlap all matter, and getting it wrong creates a bigger problem than a large final pay. Talk to an employment adviser or Employment New Zealand before you insist.
How do I stop final pays catching me out?
The underlying issue is that annual leave is a liability that builds quietly and is paid all at once. A few habits keep it under control:
- Run a leave report every month. Look for anyone with more than one year’s entitlement banked.
- Encourage leave to be taken. Long balances cost more when the person leaves, especially after pay rises.
- Treat leave as money you owe. Put a figure on it in your monthly numbers, alongside GST and PAYE.
- Keep a buffer for one surprise departure. Size it to your largest leave balance.
- Set up a facility while things are calm. A business line of credit arranged in a good month can cover a final pay in minutes, then be paid back.
The Holidays Act is being replaced by the Employment Leave Act 2026, which Employment New Zealand says comes into force on 6 August 2028. Until then, the rules above are the ones that apply to a final pay.
What if two or three people leave at once?
Resignations aren’t always spread out. A key staff member leaves, and a colleague follows. Seasonal businesses lose several people at the end of a contract or a season. Each final pay is due on its own final pay day, but in a small team they can easily stack into the same fortnight.
When that happens, the question shifts from “can we cover this pay run?” to “how much cash do we need for the next four weeks, and when does it come back in?” A short-term cash flow loan sized to the gap, repaid from normal trading over the following months, can be a cleaner answer than delaying suppliers or Inland Revenue to pay people. The 24-hour readiness check shows what a lender will want to see.
A big final pay is due and the cash is short? Let’s get ahead of the deadline.
Staff moving on is a normal part of running a business. A final pay you can’t cover shouldn’t turn a respectful farewell into a stressful week. We help New Zealand employers bridge payroll gaps like this regularly, and the best time to talk is the day you know the number — not the night before pay day.
Enquiring takes about 60 seconds, and there’s no credit check when you first enquire. Your details aren’t sprayed across a list of lenders, so your phone won’t light up with strangers. A real person looks at your business and the final pay date you’re working towards, then calls you. Please fill in the form accurately — the amount, the date it’s due and how your business trades — so we can match the right option first time.
Frequently asked questions
When does final pay have to be paid in New Zealand?
Employment New Zealand says the final leave and holiday payment must be paid on or before the pay day of the final pay period. Final wages and other money owed are usually paid at the same time.
How is unused annual leave paid out when someone leaves?
Unused annual holidays the employee is entitled to are paid at the higher of their ordinary weekly pay or their average weekly earnings over the previous 12 months.
What is the 8% in a final pay?
For the period since the employee's last anniversary date, they're paid 8% of their gross earnings for that period, less any holiday pay already paid in advance or paid as they go.
Do I have to pay public holidays that fall after the employee's last day?
Sometimes. You treat their unused entitled annual holidays as if they were taken straight after their last day. If a public holiday falls in that period and would otherwise have been a working day, it's paid too.
How is tax worked out on holiday pay in a final pay?
Inland Revenue says holiday pay paid out at the end of employment is usually taxed as a lump sum payment. Your payroll software applies the extra pay rules.
Can I pay someone's final pay in instalments?
Not without agreement. The legal deadline is the pay day of the final pay period. If the cash isn't there, fix the funding gap rather than delaying the employee's money.
Can I tell a resigning employee to use up their leave during the notice period?
If you can't agree when annual holidays are taken, Employment New Zealand says you can require them to be taken with at least 14 days' notice. Check the employment agreement and get advice first, because notice and leave can interact.