Can I cash out my annual leave?

Can I cash out my annual leave?

Under certain circumstances, employees may be entitled to ‘cash out’ excess annual leave instead of taking time off.

The Fair Work Act 2009 (Cth) has always provided that annual leave may be cashed out, but only if:

• it is allowed for by your relevant modern award or enterprise agreement, or is agreed upon between you and your employer if you are not subject to these instruments;
• you will have 4 weeks of annual leave remaining after you cash out your leave;
• you and your employer agree in writing to the leave to be cashed out; and
• you are paid the same amount that you would have been paid if you had taken the leave.

Until recently, of the 122 modern awards, only the Seafood Processing Award included a clause that allowed for cashing out of annual leave.

As part of the Fair Work Commission’s four yearly review, from 29 July 2016 employees covered under all modern awards will now be subject to this type of clause, allowing them to cash out a maximum of 2 weeks annual leave in any 12 month period.

Can my employer direct me to cash out my annual leave?

The option to cash out annual leave is only available to employees, as it requires written consent. An employer may not direct an employee to cash out their annual leave without their agreement.

The only way an employer can direct an employee to take leave is if it is ‘reasonable’, for example, if the business is shutting down over the Christmas period. If the direction is made because an employee has excessive annual leave accrued, there are strict requirements that the employer must follow. For example, an employer must not direct leave to be taken more than 12 months in advance, for less than one week, or where it would result in an employee having less than 6 weeks annual leave remaining.