In 2016 the Fair Work Commission introduced provisions into most modern awards, which enable employees to request that their annual leave entitlements be cashed out. However, an employee cannot cash out annual leave if it will result in the employee’s remaining accrued entitlement to paid leave being less than 4 weeks. Furthermore, an employee can only cash out a maximum of 2 weeks of accrued paid annual leave in any 12-month period.
The employer and employee must enter into a signed written agreement expressly stating the amount of leave to be cashed out and the payment to be made to the employee. Importantly, employers have discretion to decline a cash out request from an employee. Conversely, employers are also permitted to ask employees if they would like to cash out their annual leave. However, section 344 of the Fair Work Act 2009 (Cth) prohibits an employer from exerting undue influence or undue pressure on an employee to make, or not make an agreement to cash out paid annual leave.
Contact M+E for more information about the specific requirements which must be complied with in an agreement to cash out paid annual leave.