Alternative leave (sometimes called a "day in lieu") is a paid day off that an employee earns when they work on a public holiday. It's provided under the Holidays Act 2003 to recognise that the employee missed out on a public holiday.

An employee becomes entitled to an alternative holiday when they:

The alternative leave is earned on the day they work the public holiday. For example, if an employee works on Christmas Day 2025, they earn one day of alternative leave on 25 December 2025.

An employee earns one whole day of alternative leave regardless of how many hours they actually worked on the public holiday. If someone works a 3-hour shift on Waitangi Day, they still earn a full day of alternative leave — not 3 hours.

When they take that alternative leave, they're paid for what they would have earned on the day they take off, which might be different from what they worked on the public holiday itself.

Alternative holidays don't expire and must be kept on the employee's balance until they either take them as time off or cash them up (if eligible).

If an employee leaves your business, you must pay out any alternative public holidays in their balance as part of their final pay.

If an employee works any amount of time on a public holiday that would otherwise be a working day for them, they earn an alternative holiday. There's no minimum number of hours required.

If the public holiday falls on a day the employee wouldn't normally work, they don't earn an alternative holiday - because they haven't missed out on a day off they would have otherwise had. However, they're still entitled to be paid time-and-a-half for any hours worked.

For employees with variable or irregular days, you need to consider whether the day would "otherwise be a working day" by looking at their usual work pattern, their employment agreement, and other relevant factors like roster patterns.

An alternative leave cash up allows employers to pay out some of an employee's alternative leave as a payment, rather than the employee taking time off work.

An employee can ask for an alternative holiday to be paid out if 12 months have passed since they earned it and they have not yet taken it as a day off.

You aren't required to approve cash ups (annual or alternative leave) and you may have a policy against them in your business.

Cash up payments need to be processed a specific way because different rules apply to them:

Your employees can request alternative leave cash ups as a specific leave type in PaySauce. Always ensure they request cash ups via the cash up type, and that you record it as such in the pay run.

When your employee submits a leave request in the PaySauce app for an alternate leave cash up, it will appear in the 'cash up requests' list of your leave summary for the pay run. Apply it to your pay run from here.

If you don't have a request from the employee, you can record it in their pay by selecting the leave icon on their pay card.

Check out the article on recording leave for more information on the steps for recording different leave types, including cash ups.
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When entering an alternative leave cash up, you'll still need to enter some leave dates. We usually suggest just entering the weekend dates. The actual date range or dates selected are not too important and won't impact the employee's pay, but something does need to be selected.

To check if an employee has alternative leave that can be cashed up, go to the Employees icon and select the person from your list. Go to the Balances tab and note the balance of alternate leave displayed at the bottom right. Click on the word "Alternate leave" in the Accrued middle column. Scroll down to see the transactions with dates showing when each alternative leave day was earned. If the balance includes leave earned 12 months ago or more, the employee can cash out any or all of those older days.