Effects of unpaid leave

When an employee takes unpaid leave of more than one week during the year, this can be managed in three ways:

the employer can choose to extend the time required before the employee becomes entitled to annual holidays by the period of unpaid leave in excess of one week. That is, if an employee takes two weeks' unpaid leave, she or he becomes entitled to annual holidays one week after the anniversary of the starting date of employment;
the employer and employee can agree that an employee's average weekly earnings calculation will be modified to reflect the number of whole or part weeks greater than one week that the employee was on unpaid leave. For example, if an employee takes two weeks' unpaid leave during the year, it can be agreed that the annual-holiday pay is calculated on the basis of a 51-week year, not on the basis of 52 weeks;
the employer and employee can agree that the unpaid leave will have no effect on the employee's annual holiday entitlement.

The first week of unpaid leave does not affect either the date on which the employee becomes entitled to annual holidays or the divisor of 52.

Time while an employee is on ACC, parental leave or leave for voluntary military service does not affect the anniversary date for annual holiday purposes.

Further information & guidance

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Call us free on 0800 20 90 20 or visit our website at www.ers.dol.govt.nz.

The content of this document covers common problems. It will not answer every question and should not be used as a substitute for legislation or legal advice.

The Department of Labour takes no responsibility for the results of any actions taken on the basis of information on this website, or for any errors or omissions.