Cashing out annual leave means an employee receives payment instead of taking the leave as time off. It can suit both sides in the right circumstances, but the rules depend on which award or agreement covers the employee.
Cashing out annual leave: check the rules that apply
Award employees. Most modern awards allow cashing out, subject to conditions. These include a signed written agreement for each occasion, at least four weeks’ annual leave remaining after the cash-out, and a limit of two weeks cashed out in any 12-month period. Not every award allows it, so check the award that applies, along with any extra requirements for employees under 18.
Enterprise agreement employees. The enterprise agreement must include terms allowing cashing out. A separate written agreement is needed each time, at least four weeks’ leave must remain, and the payment must be at least what the employee would have been paid if they had taken the leave.
Award and agreement-free employees. The employer and employee can agree in writing to cash out leave, with the same protections for the payment amount and the four-week remaining balance.
Employer obligations
An employer must not force or pressure an employee to cash out leave. Keep a copy of each cash-out agreement and the required records, and check the applicable award or agreement before making any payment. The Fair Work Ombudsman has more detail on each category.
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This article provides general information about the law as described above. It is not advice on your circumstances. Laws, procedures and deadlines can change, so please get advice about your matter, particularly before signing documents or where a deadline may apply.
