Alternative holidays (days in lieu) in New Zealand, explained

"Day in lieu" is the everyday name. The Act calls it an alternative holiday, and the difference in name hides a difference in thinking. Most people picture a bank of hours you top up by working a public holiday and draw down later. That is roughly how it will work from 2028. Under the current Act it is a whole day off, earned by a specific event, that must be a working day, can't be a public holiday, is paid at the value of the day it is taken on, and never expires.

Our public holidays guide covers when an alternative holiday is earned as part of the bigger public holiday picture. This guide goes deep on the alternative holiday itself: earning, taking, paying, cashing up, termination and records. It is part of our plain-English series on NZ employment leave.

Quick answers

When an alternative holiday is earned (s 56)

Two conditions, both required:

1. the public holiday falls on a day that would otherwise be a working day for the employee; and
2. the employee works, in accordance with their employment agreement, on any part of that day.

If both are met, the employer must provide the alternative holiday and pay time and a half for the hours worked (s 56(2)). The two entitlements are separate; one is never a substitute for the other.

Deciding whether a day is an otherwise working day is the hard part and is covered in full in the public holidays guide, with a free calculator. One rule that matters especially here: if the employee would otherwise work any amount of time on the public holiday, it is treated as an otherwise working day (s 12(4)). An overnight shift that starts at 10pm on Christmas Eve and runs to 6am on Christmas Day makes Christmas Day an otherwise working day for that employee, and working those six hours earns a whole alternative holiday.

Exclusion: an employee who works for the employer only on public holidays never earns an alternative holiday (s 56(4)). They still get time and a half.

Part of the day, whole holiday (s 57(1)(c))

The alternative holiday must be a whole working day off, "regardless of the amount of time the employee actually worked on the public holiday". A two-hour stocktake on Anzac Day morning earns a full day. Employers sometimes try to give "two hours in lieu"; that is not an alternative holiday and the full day is still owed.

On call (s 59)

The on-call rules apply only if the public holiday would otherwise be a working day for the employee (s 59(1)(a)), and not to someone who is on call only on public holidays (s 59(1)(b)).

• Called in to work: alternative holiday earned (s 59(2)), plus time and a half for the hours worked (s 59(4)).
• On call, not called in: alternative holiday still earned if the on-call restriction was such that, for all practical purposes, the employee "has not had a whole holiday" (s 59(3)). Must stay sober, in town and able to attend within 30 minutes: that is not a holiday. Might get a text asking a question: that is.

Taking the alternative holiday (s 57)

The alternative holiday must be:

• taken on a day agreed between the employer and employee (s 57(1)(a));
• a day that would otherwise be a working day for the employee (s 57(1)(b)), so it can't be taken on a Saturday by a Monday-to-Friday employee;
• a whole working day off (s 57(1)(c));
• not a public holiday (s 57(1)(d)). You can't "take" a day in lieu on Boxing Day to avoid paying for Boxing Day.

If the parties can't agree on a date, the employer may determine one "on a reasonable basis" and must give at least 14 days' notice (s 57(2)–(3)). Reasonable means considering the employee's circumstances, not just the roster gap. There is no equivalent power for the employee to force a date, but an employer that refuses every request is not acting in good faith (s 73).

The entitlement remains in force until the day is taken or paid for (s 56(3)). It does not expire after 12 months, or at the end of the financial year, or when the payroll system rolls over. Any policy that says otherwise reduces a minimum entitlement and has no effect (s 6(3)).

How the alternative holiday is paid (s 60)

Pay for the alternative holiday is not less than the employee's relevant daily pay or average daily pay for the day on which the alternative holiday is taken (s 60(1)), paid in the pay for that period (s 60(2)(a)).

This is the point most people miss: the day is valued when it is taken, not when it was earned. Someone who worked four hours on a public holiday a year ago and takes their alternative holiday on a day they would have worked ten hours is paid for ten hours. The reverse is also true.

Relevant daily pay Default

What the employee would have earned had they worked the day the alternative holiday is taken, including overtime and incentive payments they'd have received (s 9). No time and a half is added; that applied to the public holiday, not to the day off.

Average daily pay Only when allowed

52 weeks' gross earnings ÷ days worked or on paid leave, usable only if RDP can't be determined or daily pay varies within the pay period (s 9A).

Cashing up an alternative holiday (s 61)

There is no limit on how many alternative holidays can be cashed up, unlike annual leave's one-week cap. The 12-month rule is per alternative holiday, from the date each was earned, so a stack of five earned over Christmas becomes cashable, one by one, the following Christmas.

When employment ends (s 60(2)(b))

All untaken alternative holidays are paid in the final pay, at the employee's relevant daily pay or average daily pay for their last day of employment. The 12-month cash-up rule does not apply here; a day earned last week is paid out too. Note that the public-holidays-after-termination rule (s 40(3)) is written for annual holidays only, so untaken alternative holidays are not extended over a public holiday falling after the end date.

Transferred public holidays and the alternative holiday

Employer and employee can agree in writing to treat a different 24-hour period, or a different identified day, as the public holiday (ss 44A, 44B), which is common for overnight and 24/7 operations. When that happens, the alternative holiday follows the transferred day: it is earned if the employee works on the agreed period and that period would otherwise have been worked. The transfer must not reduce the employee's entitlements, so a transfer that conveniently lands the holiday on a day the employee never works is not valid.

Sick on the day the alternative holiday was booked

The Act's "sick on a public holiday" rule (s 61A) applies to public holidays, not to alternative holidays. If an employee is sick on a day they had agreed to take as an alternative holiday, the Act doesn't say what happens. Our practice, which we think reflects the purpose of the entitlement, is to treat the day as sick leave (if the employee wants and has the balance) and keep the alternative holiday for another day. An employer is not obliged to do that, and a policy either way should be written down.

The records you must keep (s 81)

• The date on which the employee became entitled to each alternative holiday (s 81(2)(k)). This drives the 12-month cash-up rule.
• The dates of, and payments for, any public holiday on which the employee worked, and the hours worked (s 81(2)(i)–(j)).
• The dates of, and payments for, alternative holidays taken (s 81(2)(l)).
• Any transferred public holiday and the period it was transferred to (s 81(2)(ja)).
• Payments made in exchange for an alternative holiday (s 81(2)(n)).

Keep all of it for 6 years (s 81(4)). Alternative holidays are where audits most often find "phantom" balances: days recorded as taken that were never a working day, or days earned by casuals for whom the public holiday was never an otherwise working day.

The mistakes we see most

1. Giving hours in lieu instead of a whole day (s 57(1)(c)).
2. Granting an alternative holiday to everyone who works a public holiday, including those for whom it wasn't an otherwise working day. That is a gift, not an entitlement, and it inflates liabilities.
3. The reverse: denying it to casuals for whom the day was an otherwise working day on the lookback.
4. Valuing it at the earning date rather than the day it is taken (s 60(1)).
5. Expiring balances after 12 months (s 56(3)).
6. Forced cash-ups, or cash-ups before 12 months (s 61(2)).
7. Letting it be taken on a public holiday or a non-working day (s 57(1)(b), (d)).
8. Ignoring on-call employees who weren't called in but had no real holiday (s 59(3)).

What changes on 6 August 2028

The Employment Leave Act 2026 replaces alternative holidays with alternative leave, accrued in hours. As passed:

• Hour for hour. For working on a public holiday that is an otherwise working day, the employee accrues one hour of alternative leave for each hour (or part hour) worked (ELA s 63(2)). Two hours worked earns two hours, not a day.
• On-call hours count where the agreement allows the employer to require public holiday work: each hour on call but not working accrues an hour, capped at the hours the employee would otherwise have worked that day (ELA s 63(3)–(4)).
• The otherwise working day test becomes statutory: if the agreement specifies days or a pattern, follow it; otherwise the employee must have worked (or been on paid or unpaid leave) on at least 50% of the same weekday in the preceding 13 weeks (ELA ss 12–13). This is the rule we already recommend.
• Taking it: still by agreement, employer not to unreasonably withhold consent, employer may fix a day or part day with 14 days' notice if no agreement, not on a public holiday (ELA s 65).
• Cash-up at any time on the employee's written request, no 12-month wait, employer to respond within 14 days and may decline (ELA s 67).
• Paid at the hourly leave payment rate plus fixed allowances, and paid out at that rate on termination (ELA ss 121–126).
• Existing alternative holidays convert to hours on commencement under the transitional schedule.

Until 6 August 2028 the whole-day rules above apply in full.

Frequently asked questions

Sources