Do Your Employees Want to Cash Out Annual Leave?
Not sure about the guidelines for cashing out annual leave? You need to know some essential rules before paying out annual leave so that employees are not disadvantaged. Talk to us, and we'll help review your payroll and leave obligations
Common Rules for Cashing Out Leave
The employee must have at least four weeks of leave left available after paying out any excess amount.
You can’t pay out more than two weeks of leave per year.
While leave accrues as usual when an employee takes leave, you don’t need to accrue leave on cashed out leave.
You need to have a written agreement with the employee, stating the number of hours being paid, the total amount and when you will pay it.
Remember to check the employee’s award first and keep all records and calculations!
You Can Direct Employees to Take Excess Leave
You can't force an employee to cash out leave, but you can ask an employee to take leave in some circumstances. If you have employees accruing a lot of leave, check the award for guidance. For example, some awards allow an employer to direct an employee to take one week or more of leave if they have more than eight weeks accrued, give at least six weeks’ notice, and leave at least six weeks of leave available.
Need Help?
Remember, annual leave is paid out when an employee leaves your business, so it’s good to keep an eye on how much is owing and not let too much accrue. Also, employees should be taking leave regularly for their health and wellbeing.
If you need help, talk to us, and we can review your payroll, leave accruals and modern awards to help manage employees’ annual leave.