Cashing out annual leave

Read the rules that apply for cashing out annual leave.

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About cashing out annual leave

Cashing out annual leave is when an employee receives direct payment of their annual leave instead of taking paid time off work.

Employees can cash out their annual leave if it’s allowed under their award or enterprise agreement.

Cashing out annual leave under an award

Most awards allow an employee to cash out annual leave.

Under most awards, an employee can cash out annual leave when they have:

  • at least 4 weeks annual leave left after the cash out, and
  • a signed written agreement with their employer that outlines the amount of leave being cashed out, the amount they will be paid and the date it will be paid (if the employee is under 18 their parent or guardian must also sign it).

Employers have to keep this agreement for the employee's records. Learn more about record-keeping obligations at Record-keeping.

The payment for cashed out annual leave has to be the same as what the employee would have been paid if they took the leave.

An employee can't cash out more than 2 weeks each 12 months.

An employer can't force or pressure an employee to cash out annual leave.

Tip: Make sure you check your award

It’s important to check what your award says about cashing out annual leave as not all awards allow it.

Access your award from our List of awards page.

If you’re still not sure which award applies, search by occupation or industry in our Pay and Conditions Tool. You can also use this tool to calculate minimum wages and some entitlements.

Employers and employees can use the Agreement to cash out annual leave Agreement to cash out annual leave when cashing out annual leave.

Example: Cashing out annual leave under an award

Luanne is a hairdresser working full-time at a hair salon. She’s covered by the Hair and Beauty Award.

Last year, Luanne had planned an overseas trip but had to cancel it because of health issues. She now has 9 weeks of annual leave accrued.

Luanne wants to know if she’s allowed to cash in some of her annual leave as she won’t be going overseas anymore.

Luanne checks this page about cashing out annual leave under the Hair and Beauty Award. She reads that most, but not all, awards allow her to cash out annual leave. She checks the Hair and Beauty Award and confirms that she can cash out her leave (with certain rules applying).

Luanne learns that under her award she’s entitled to cash out annual leave if she has:

  • at least 4 weeks annual leave left after the cash out, and
  • a signed written agreement with her employer that outlines the amount of leave being cashed out, the amount she will be paid and the date it will be paid.

After reading our information, Luanne approaches her boss, Emily, about making this request. They have a discussion and agree for Luanne to cash out 4 weeks of annual leave. They use our Agreement to cash out annual leave Agreement to cash out annual leave, sign it and each keep a copy for their records.

Luanne is paid her annual leave the following pay cycle. Her remaining balance is 5 weeks annual leave.

Cashing out annual leave under an enterprise agreement

Annual leave can only be cashed out when an enterprise agreement allows it.

To check if you're covered by an enterprise agreement, go to our Finding an agreement page for advice.

If you already know you're covered by an enterprise agreement, go to the Fair Work Commission agreement database now.

Certain rules apply when cashing out annual leave:

  • an employee needs to have at least 4 weeks annual leave left over
  • a written agreement needs to be made each time annual leave is cashed out
  • an employer can't force or pressure an employee to cash out annual leave
  • the payment for cashed out annual leave has to be the same as what the employee would have been paid if they took the leave.

Cashing out annual leave for award or agreement free employees

An award and agreement free employee can make an agreement with their employer to cash out their annual leave if the:

  • agreement is in writing
  • employer pays the employee the same amount the employee would get if they had taken the leave, and
  • employee has at least 4 weeks left in their leave balance after the rest is cashed out.

To find out how to check if an employee is award or agreement free, go to Award and agreement free wages and conditions.

High income employees

High income employees are employees who earn above the high income threshold. This amount changes from year to year.

To learn about cashing out annual leave for these employees, go to our Library article Cashing out annual leave for high income employees.

Source reference for page: Fair Work Act 2009 sections 92–93, 94(1)

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