Often a business will have staff who hoard their annual leave, whether it is to insulate themselves for a rainy day, to seek longer periods of leave in the future, or perhaps they just prefer to work rather than holiday.
For a business, this hoarding can create issues. Greater financial provision has to be made for annual leave entitlements. Uncertainty can exist as to whether those staff members may seek long periods of leave at a time not suitable to the business. Employee errors or even fraud can remain undetected if an employee never takes annual leave.
The ability for an employer and an employee to agree to cash out some of an employee’s annual leave has not featured in most Modern Awards. That is about to change. The Fair Work Commission has recently determined that model rules for the cashing out of annual leave are to be inserted in 112 Modern Awards.
What will the requirements be?
- A signed agreement between employer and employee on each occasion (signed by a parent or guardian if the employee is under 18)
- The agreement must state the amount of leave to be cashed out, the payment to be made, and when it will be made
- The payment must be based on wage rates that apply at the time of the cashing out not an earlier time
- A four week accrued entitlement to paid annual leave must be retained by the employee
- In any period of 12 months, only 2 weeks accrued annual leave can be cashed out
- The employer must keep a copy of the agreement as an employee record
But remember, an employer is not allowed to exert undue influence or pressure on an employee to make, or not make, such an agreement. Further, an employer is not to knowingly or recklessly make false or misleading representations about an employee’s workplace rights. So, care needs to be taken in seeking to implement the cashing out of annual leave in your business.
At Everingham Solomons, we have a range of resources available to assist employers meet their human resources obligations because Helping You is Our Business.
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