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Can your employees cash out annual leave?

By Bryan Wilcox
01 October 2024 | 12 minute read
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Some employees live for a couple of weeks on the beach or have an annual visit to the ski fields. Others prefer to stay at their desk and pocket the cash, if they’re able. But in the real estate industry, is it legal to allow employees to cash out their accrued annual leave?

Every employer will undoubtedly understand that if an employee fails to take their full yearly entitlement to paid annual leave (four weeks), the days not taken by the employee will accrue to be taken at some future point in time. Alternatively, the untaken leave will be paid out on termination of the employee’s employment.

With this in mind, it’s not uncommon for employees to accrue significant amounts of annual leave, the value of which becomes a “liability” on the company balance sheet.

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As our economy tightens, thanks to rising inflation and higher interest rates, we are receiving an increasing number of calls from members asking about an employee’s ability to “cash out” some, or all, of their accrued annual leave. It’s apparent that many employees are seeking to cash out their annual leave as a means of solving a short-term financial difficulty.

So, the question from the employer is quite simple – “Can I grant a request from my employee to cash out some of their accrued annual leave without being in breach of industrial laws.”

The answer is YES … but within strictly defined limits!

Almost all employees employed within a real estate agency will be employed under either the Real Estate Industry Award 2020 or the Clerks – Private Sector Award 2020. The entitlement for an employee to cash out a period of annual leave is regulated by an identical provision contained in each award.

It is important to note there must be agreement from both sides to the cashing out arrangement. Neither an employer nor an employee can compel a cashing out arrangement to occur.

In order to lawfully cash out accrued annual leave, the following questions must all be answered in the affirmative:

- Will the employee have more than four (four) weeks of accrued annual leave left after cashing out?
- Is the payment equal to or more than the amount that would have been payable had the employee taken the annual leave at the time the payment is made?
- Is your employee only cashing out a maximum of two weeks annual leave in a 12-month period?
- Is there is a signed written agreement between the employer and the employee?

This written agreement must state the amount of leave to be cashed out, the amount of the payment for this leave, and the date the payment is to be made. And lastly, this agreement must be kept as an employee record.

It should be clearly noted that the above only applies to annual leave and to award-covered employees. It does not, for example, apply to long service leave (LSL) entitlements. The cashing out of LSL is an entirely different matter and is regulated by each state and territory. Should you have an employee who seeks to cash out their LSL entitlement, you should seek professional advice.

Bryan Wilcox is the CEO of the Real Estate Employers’ Federation.

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