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.
Are your staff asking to cash out annual leave? There are some important rules to remember before paying out annual leave.
Firstly, you must review the employee’s modern award to check that cashing out leave is explicitly allowed.
Most awards do allow for excess annual leave to be paid out, and we give you the general rules here – but you need to check the relevant award for special regulations before agreeing to cash out leave.
Common Rules for Cashing Out Leave
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.
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.