How to cash out annual leave

Thinking about if you can cash out annual leave? If you’ve been at the same job for a while now, you may not have realised how much leave you have acquired, or what to do with it all. Especially with the current times of uncertainty when the world is slowly opening and things are still a little crazy, you may want to consider cashing out your annual leave rather than using it. This Business Kitz blog will answer your questions regarding whether you can cash out your personal or annual leave!

Cashing out leave can be an effective way for employers to manage excessive leave liability. If an employee is not covered by an Enterprise Agreement or a Modern Award or has more than six weeks’ worth of annual leave acquired, this is an opportunity for employers to consider engaging with them about potentially cashing out their leave. If you’re wanting to cash out annual leave, you’re going to want to be familiar with the National Employment Standards (“NES”) in the Fair Work Act 2009 (Cth).

Am I covered by a modern award?

The NES states that if an employee is covered by a Modern Award, and both the employee and employer agree to cash out annual leave then it has to be permitted in the terms of the relevant award. Every four years there is a review of the Modern Awards and during the recent review, the Fair Work Commission developed a new “model” annual leave clause, which has now been inserted into most of the Modern Awards. This means that the employer is responsible for checking the applicable Award to determine whether cashing out is permitted and what conditions are attached.

Am I covered by an enterprise agreement?

The NES provides that if an employee is covered by an Enterprise Agreement both the employee and the employer can agree to cash out annual leave if the terms of the Agreement allow it. Enterprise Agreements differ from Modern Awards as there is no standard annual leave clause included. This makes the employer responsible for researching whether cashing out is permitted and the conditions that may apply. 

What if I’m not covered by an enterprise agreement or modern award?

If you are not covered by either an Enterprise Agreement or a Modern Award, then it’s up to the employer and the employee to decide whether they agree to cash out annual leave. The only condition is that the employee is required to have at least four weeks of annual leave remaining after cashing out.

If both the employer and the employee agree to the cash-out:

  • Each agreement to cash out annual leave must be separate and have a contract in writing stating it; and
  • The employer must pay the employee the full amount payable if the employee had taken the leave.

Can I cash out personal leave?

The NES states that if an employee is not covered by a Modern Award or an Enterprise Agreement, they are not able to cash out any personal/carer’s leave. If an employee is governed by an Enterprise Agreement or Modern Award, they may be able to cash out personal leave, so long as it’s permitted in their contract. This is very rare to be included in the contract as the NES do not require personal leave/carer’s leave to be cashed out when terminated. 

Can I cash out long service leave?

When it comes to cashing out long service leave, it is governed and regulated by the relevant State or Territory long service leave scheme. Different states have different regulations so it’s important to be familiar with your state’s current regulations. 

In South Australia, Tasmania and Western Australia, cashing out long service leave is permitted. In these jurisdictions, the long service leave payout has to occur after the entitlement has been accrued. This agreement has to be in writing and South Australia has to be signed by both employee and employer.

In Queensland, for an employee to be eligible to cash out leave, they must first receive approval from Queensland Industrial Relations Commission (QIRC). The QIRC will only grant the request if they are satisfied that the payment should be made on compassionate grounds or the grounds of financial hardship.

Cashing out long service is prohibited in New South Wales, Northern Territory, Victoria and Australian Capital Territory.

Legal advice

If you still have questions regarding cashing out personal or annual leave, our sister company Legal Kitz is here to help! If you think your employer has been unfair or failed to comply with your agreement or award, please contact Legal Kitz for legal advice. We offer FREE 30-minute consultations to assist you with any queries or concerns regarding annual leave and employment rights. Book here now for your free consultation.

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