A provision in all modern awards is a clause that gives employees the option on cashing out annual leave – albeit in certain circumstances.

Enterprise agreements can permit cashing out. Award and agreement-free employees can also cash out, provided they satisfy the provisions of section 93 of the Fair Work Act 2009.

Those provisions state that cashing out must not leave an employee with a paid annual leave accrual of less than 4 weeks, and that each occasion when leave is cashed out must be agreed to separately in writing.

This will permit you to agree with an employee to cash out accrued annual leave subject to the following requirements:

• each cashing out of a particular amount of accrued paid annual leave is a separate agreement between you and the employee;
• that agreement must be in writing and retained as an employee record;
• the agreement must state the amount of accrued leave to be cashed out and the payment to be made to the employee, as well as the date on which the payment is to be made;
• the agreement must be signed by you and the employee and, if the employee is under 18 years of age, the employee’s parent or guardian;
• the employee must be paid at least the full amount that would have been payable to the employee had the employee taken the leave at the time that it is cashed out (including leave loading, if that would have been paid);
• the employee must retain a minimum of at least 4 weeks accrued leave after cashing out, and;
• employees may not cash out more than two weeks’ accrued annual leave in any 12-month period.

You do not have to agree to an employee’s request to make a cashing-out agreement. Conversely, you cannot mislead an employee about their entitlements under any cashing-out agreement. Nor can you use undue influence or pressure on an employee to make a cashing out agreement.