Tuesday, 20 March 2018 09:35

Can an employee 'cash out' their annual leave?

 

FEDERAL

Yes.

However, only if it is done in accordance with any cashing out terms included in an Award/Agreement (for Award/Agreement covered employees) or the Fair Work Act 2009 (for Award/Agreement free employees).

The employer must pay the employee at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.

An employer must not exert undue influence or undue pressure on an employee to cash out an amount of their paid annual leave entitlement.

Award/Agreement Free Employees

An employer and an Award/Agreement free employee may agree to the employee cashing out a particular amount of the employee's accrued paid annual leave.

Such agreement must not result in the employee’s remaining entitlement being less than 4 weeks.

To request to have a particular amount of accrued paid annual leave cashed out, the employee must complete the ‘Agreement To Cash Out Annual Leave’ form provided by the company.

  • Vehicle Manufacturing, Repair, Services and Retail Award 2010
  • Road Transport (Long Distance Operations) Award 2010
  • Passenger Vehicle Transportation Award 2010
  • Clerks—Private Sector Award 2010

In accordance with the above Awards, an employer and an employee may agree in writing to the cashing out of a particular amount of accrued paid annual leave by the employee.

Such agreement must not result in the employee’s remaining entitlement being less than 4 weeks.

The maximum amount of annual leave that may be cashed out in any 12 month period is 2 weeks.

Each cashing out of a particular amount of paid annual leave must be the subject of a separate agreement which must:

  • state the amount of leave to be cashed out and the payment to be made to the employee;
  • state the date on which the payment is to be made;
  • be signed by the employer and employee (if the employee is under 18 years of age, the agreement must be signed by the employee’s parent or guardian);
  • be kept by the employer as an employee record.

Who is entitled to annual leave loading?

Various Awards require an employer to pay an additional loading of 17.5% (calculated on the applicable minimum Award rate) on paid annual leave.

This includes employees covered by the Vehicle Manufacturing, Repair, Services and Retail Award and Clerks’ Private Sector Award.

Employees who are award free do not receive annual leave loading unless it is specified in a contract of employment.

If the employee is in receipt of an above Award payment which offsets such entitlement to leave loading, such loading may not be payable.

Is annual leave loading payable on termination of employment?

Yes.

Leave loading is payable on any unused annual leave paid on the termination of employment.

Does an employee have to wait one year before being able to take annual leave?

No.

Annual leave is accrued on an employee’s ordinary hours of work from the time they commence with their employer.

STATE

Generally, most State Awards do not allow employees to cash out their annual leave.

However, if the applicable Award does allow cashing out of annual leave OR if the employee is Award-free, an employer can agree to an employee cashing out their annual leave.

In this situation, the employee must have at least one year's (4 weeks) accrued annual leave and can cash out up to 50% (two weeks) of their leave.

An employer must not exert undue influence or undue pressure on an employee to cash out an amount of their paid annual leave entitlement.

Any agreement must be in writing and should be retained with time and wages records.

Who is entitled to annual leave loading?

State Awards in Western Australia generally require an employer to pay annual leave loading (usually 17.5% of wages) when they take annual leave.

Employees who are award free do not receive annual leave loading unless it is specified in a contract of employment.

Is annual leave loading payable on termination of employment?

Many State Awards require employers to pay annual leave loading on fully accrued annual leave paid out on termination. Where it is only part of a year, leave loading is not payable.

Does an employee have to wait one year before being able to take annual leave?

Generally, State Awards require an employee to work for 12 months before they can take annual leave unless the employer agrees that the employee can access the annual leave earlier. Refer also to your relevant award.

For more information regarding annual leave or Industrial Relations advice, contact Ron Ballucci at MTA WA on (08) 9233 9800.

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