Annual leave is an often overlooked employee benefit, the careful management of which can save your business significant sums of money.

Cashing out annual leave

Most employees now can cash out some of their annual leave provided the following conditions are met:

  1. Each cash out must be covered by a written agreement between employer and employee
  2. Employers can’t force employees to cash out
  3. After cash out their remaining leave balance cannot be less than 4 weeks
  4. No more than 2 weeks every 12 months can be cashed out
  5. Payment must be equivalent to what they would have received if they had taken the leave

Forcing an employee to take leave

  1. If an employee has more than 8 weeks’ accrued leave and there is provision for it in the relevant Modern Award or Enterprise Agreement then an employer can “force” an employee to take leave
  2. One week minimum per occasion
  3. Your request for them to take leave must be reasonable
  4. Minimum 2 months’ notice and no more than 12 months’ notice
  5. After leave is taken employee’s leave balance cannot be less than 6 weeks

How does this save you money as a business owner? When an employee takes annual leave they are paid whatever salary they are on when they use their annual leave. What you don’t want is an employee accruing leave when they’re earning say, $75,000pa, and then using it 2 years later when they’re earning $95,000. So, the sooner you get employees to either cash out their annual leave or use it (a mandatory Christmas shutdown is also a good idea, but make sure it’s in your employment contract) the lower your annual leave liability will be.