An alarm installer has to pay a former worker $25,385.12 because it incorrectly treated her as a casual employee.
Sandra Watkins' contract provided no annual leave over seven years, but the Employment Relations Authority has ruled the contract was voided when she began working regular shifts for Insite Security and Investigation in north Auckland.
The payment system often referred to as 'pay as you go' involves a portion of an employee's weekly wage being calculated as holiday pay.
It applies only to people on fixed-term contracts under 12 months, for work that is so irregular it is impracticable for an employer to provide annual leave.
The authority found Ms Watkins was relied on for regular shifts and should have been given annual leave and paid extra for public holidays.
It awarded her $21,885.12 in unpaid leave and public holidays and $3500 in costs, but did not fine Insite as it said there was no evidence the company intended to deprive her of any pay.
Ms Watkins will be paid out at $400 per month by the company, and will meet with them once a year to review the payments.
The Public Service Association said it was a problem that regularly cropped up.
"Where there's a regular work pattern and people are regularly working for their employer, they are entitled to accrue and take annual holidays," Public Service Association legal adviser Fleur Fitzsimons said.
"We know there are employers out there who are unlawfully getting it wrong and not giving workers what they're entitled to."
She said 'pay as you go' arrangements might be suitable for "something like a wedding", but not for regular work.
Business New Zealand said the case should serve as a warning to other employers.
"It's a recognition of the changing nature of the job," said its employment relations policy manager, Paul Mackay.
"I think this case can be used as a reminder to employers to make sure they're clear about the status of people when they take them on, and they remain clear as time goes on."