Did you know employees can “cash-up” up to one week’s worth of annual leave if the employee and employer agree?

Employees entitled to annual leave may exchange up to a week’s leave for money. Multiple requests can be made until the maximum week is cashed up in a year.

To request cash-up or not is the employees’ decision. Employers must not pressure employees to cash-up. Employers must not restrict cashing up rights to less than a week or to a certain number of requests per year. If an employer pays cash-up without the employee requesting it, the employee can keep the money and also take their annual leave. The employer may also face a penalty, so it’s important to get it right!

However, an employment agreement can outline a process for cash-up requests and employers can have a blanket policy of not considering any cash-up requests. Employers should advise current employees of any new policies, and let new employees know about all policies.

To cash-up, an employee must make a written request to their employer. Unless the employer’s policy does not allow cashing up, employers must consider the request within a reasonable time and may decline the request. If the employer declines the request they must let the employee know in writing.

If an employer agrees to cash-up, payment must be made promptly – usually on the next pay day. The payment must at least equal the amount the employee would receive if they had taken the leave. Cashed-up leave should be treated as extra pay or as a bonus. It is taxable, so PAYE should be calculated using the rates for lump sum payments. KiwiSaver or Student Loan payments should also be deducted.