This factsheet will help you to:
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Decide whether to grant annual leave in advance
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Calculate the correct payment for annual leave taken in advance
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Determine when it’s appropriate to use a wage deduction clause
Taking annual leave in advance of entitlement
Employees can ask to take annual leave in advance of entitlement. This can occur when they have
already used up their annual leave entitlement, or because they are in their first year of employment
and are yet to accrue any leave. The employer decides if an employee will be able to take advance
leave.
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What are the benefits of allowing employees to take annual leave in advance of
entitlement?
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It can help with workplace morale. An employee is more likely to go the extra mile for an
employer who’s accommodated their request to take time off for a holiday or important event.
It can help with budgeting. Annual leave is essentially a liability on the books - an employer
should be putting aside 8% holiday pay every payday so that it’s available if the employee
resigns unexpectedly. Allowing an employee to use their annual leave in advance of
entitlement reduces this liability.
The payment for annual leave taken in advance is still based on the greater of the employee’s
ordinary weekly pay or average weekly earnings for the last 12 months. If the employee is still in their
first year of employment, divide their gross earnings by the number of weeks worked.
When the employee reaches their entitlement date (normally their anniversary), they will receive their
four weeks annual leave minus any annual leave granted in advance.
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A word of caution:
Before agreeing to your employee’s leave request, work out how much annual leave they have
accrued since their last anniversary date or their start date. As a general rule of thumb, this should be
the maximum amount granted in advance, otherwise the employee’s balance will go into negative.
You can, of course, decide to grant annual leave in advance of it being accrued. The circumstances
are crucial here - a lot depends on the particular employee and their risk of leaving in the near future.
If you do grant this leave, make sure you ask the employee to sign a deductions clause, this gives you
permission to deduct any annual leave they owe from their final pay.
Please refer to the DairyNZ website for full terms and conditions relating to the use and distribution of this document
Use the examples below to help you on farm.
Example 1:
Jake is a farm assistant who’s been with the business for 9 months. He is getting married and wants
to take annual leave for the wedding and honeymoon. He hasn’t reached his one year anniversary so
doesn’t have any annual leave entitlement. However he does have approximately 3 weeks of annual
leave accrued (9/12 months x 4 weeks). He asks his employer Daniel for two weeks off – Daniel is
happy to grant this leave. It’s an important occasion, and Jake has plenty of accrued annual leave,
more than enough to cover the 2 weeks off.
Example 2
Carol is a farm manager who’s been with the business for 15 years. She used her annual leave
entitlement a couple of months ago for an overseas holiday. She currently has one week accrued
annual leave. Her school-aged son comes down with a fairly serious illness – recovery is expected to
take three weeks. Carol takes sick leave to look after her son. When this is used up, she asks her
employer Jason to use her accrued annual leave (one week) – Jason agrees. At the end of the week,
Carol asks for one more week off – her son is on the road to recovery but is not fit to return to school.
Jason would be well within his rights to say that this leave must be unpaid sick leave. However,
because of the circumstances, Jason decides to grant Carol annual leave in advance of it being
accrued. Carol’s annual leave balance is now in the negative. Jason makes this decision knowing
Carol – she’s a valuable employee who’s been with the business many years and he knows that she
won’t abuse this privilege. Her employment agreement contains a clause which gives permission to
deduct any annual leave owing from her final pay, if in the unlikely event she resigns, he knows he will
be able to recover this annual leave debt.
Please refer to the DairyNZ website for full terms and conditions relating to the use and distribution of this document