Annual Leave Accrual & Cashing Out

by AHR Support

Accrual of Annual Leave

Annual Leave accumulates in accordance with an employee’s work hours which varies dependent upon employment type, with a full time employee of 38 hours per week entitled to approximately 4 weeks annual leave per year.

Annual leave continues to accumulate when an employee is on any form of paid leave such as:

  • Annual leave;
  • sick and carer’s leave;
  • community service leave; and
  • long service leave.

*Any period of annual leave that has been, ‘cashed out’ will not accrue additional leave. Additionally, it does not accrue in circumstances of unpaid leave, inclusive of the Government’s ‘Paid Parental Leave Scheme’, as this is considered unpaid leave in consideration of the place of employment.

Annual leave is paid out upon termination of employment. Employers must pay employees for any accumulated annual leave that has not been used, equivalent to what would have been paid should the employee have continued working for the Company inclusive of leave loading and other entitlements. In accordance with Fair Work, these payments apply even if the award, registered agreement, or employment contract states that they do not.

Cashing Out Annual Leave

The cashing out of annual leave is when an employee receives payment of accumulated hours of annual leave instead of taking time off work.

Employees working under awards and registered agreements, are only eligible to cash out annual leave if it is specified within such. If an employee does not work under an award or agreement, then an arrangement can be made and agreed upon between employer and employee to have the leave cashed out.

Eligibility to cash out annual leave requisites:

  • At least 4 weeks annual leave left accrued after receiving the cash out;
  • A written agreement signed by the employee and employer to state that the cash out transaction has taken place. This must happen every time a cash out occurs;
  • The decision to be that of the employee. An employer cannot pressure or ask an employee to cash out annual leave; and
  • The payment to be the same as it would have been should the employee have taken time off work and been paid the leave.

If you would like to know more about the accrual of annual leave, the process of cashing out, or your employee’s eligibility surrounding such, our team at Assurance HR Management can assist. Contact us today on 1800 577 515!

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