It isn’t uncommon for employees to ask to be paid out their annual leave as cash rather than actually taking it. This is particularly so around Christmas where a little extra cash is needed for the additional costs at this time of year. Also, with prices rising and interest rates on hold at a fairly high level, many employees are doing it tough.

It is possible to pay out annual leave but there are a couple of restrictions set out in the awards that must be followed.

The main restriction is that only two weeks annual leave can be paid out in any 12-month period. That is, if you pay out two weeks of annual leave now for Christmas, you have to wait 12 months before you make any further payout, that is, December 2025.

The other restriction is that there must remain four weeks of annual leave still on the books for the employee. This is set out so that the employee can actually take time off at some stage.

Whenever there is a cashing out of annual leave it must be recorded in writing, setting out the amount of annual leave being cashed out, the date on which the payment is made, and be signed by both the employer and the employee. If the employee is under 18 years of age it must also be signed by the employee’s parent or guardian. A separate signed agreement is required each time there is a cashing out of annual leave.

Of course, annual leave loading must also be paid, unless the annual leave loading is otherwise accounted for in an annualised salary of in an over-award payment which is evidenced in writing.