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Cashing out Annual Leave.

Posted by Melissa Behrend on Sep 26, 2016 8:46:36 PM

If you are a business owner, small, large, or in between, annual leave can be a major liability. If you do not manage it properly, it can become a problem. When wage rates go up every year, so does your annual leave liability. It makes good business sense to manage it.

The recent Fair Work decision enabled employees covered by 122 Awards to cash out their annual leave - a great result for business owners.  Previously, only employees covered under an enterprise agreement were able to.

On Holiday Calendar Shows Annual Leave Or Time Off” by Stuart Miles On Holiday Calendar Shows Annual Leave Or Time Off” by Stuart Miles


The decision has taken effect from 29 July 2016. The four main points of change are

  1. Cashing out annual leave;
  2. Taking leave in advance;
  3. Managing excessive leave, and;
  4. When to pay annual leave.

#1. Cashing out annual leave

Employees are now able to cash out annual leave as long as the balance after taking leave is 4 weeks.  The agreement must be in writing. You may not cash out more than 2 weeks in a 12-month cycle.

#2. Taking leave in advance

This clause enables employees to take leave before they are entitled to the leave and is only allowed if the employee and the employer have an agreement signed by both parties.  In addition, the agreement must state how much leave is to be taken and when it will commence.

#3. Managing excessive leave

This change comes into effect on 29 July 2017. It enables employers to direct their employee to take leave – provided they meet certain requirements prior to that direction. Fair Work describes excessive leave as more than 8 weeks’ worth, or 10 weeks for a shift worker.

#4. When to pay annual leave

Under some awards, it is a requirement to pay employees before their leave commences. However, if employers pay employees electronically (Electronic Funds Transfer) you may now pay them under the business’s normal pay cycles.

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