Managing people

Can you refuse requests to cash out annual leave?

Can an employee insist on cashing out part of his/her accrued annual leave? Or can an employer refuse the request? 

14 September 2021

Whether an employee can cash out accrued annual leave is subject to the terms of the applicable modern award. Note that changes have been made to the relevant provisions of awards since the Fair Work Act 2009 first commenced. 

Let's look at an example, the Surveying Award 2020. 

Clause 22.8 of the award provides that each cashing out arrangement is subject to an agreement between an employer and an employee. Protections apply to an employee where an employer is attempting to exert undue influence or pressure to enter into a cashing-out arrangement. 

The subclause, however, does not require an employer to explain or justify why an employee’s request to cash out annual leave was denied. 

Workplace health and safety considerations would certainly be an objective reason to refuse a request to cash out annual leave. Agreeing to cash out annual leave in a particular instance does NOT mean an employer is required to agree to an employee’s request to cash out annual leave at any future time. 

Clause 22.8 is reproduced below.  

22.8 Cashing out of annual leave 

(a) Paid annual leave must not be cashed out except in accordance with an agreement under clause 22.8. 

(b) Each cashing out of a particular amount of paid annual leave must be the subject of a separate agreement under clause 22.8. 

(c) An employer and an employee may agree in writing to the cashing out of a particular amount of accrued paid annual leave by the employee. 

(d) An agreement under clause 22.8 must state: 

    (i) the amount of leave to be cashed out and the payment to be made to the employee for it; and 

    (ii) the date on which the payment is to be made. 

(e) An agreement under clause 22.8 must be signed by the employer and employee and, if the employee is under 18 years of age, by the employee’s parent or guardian. 

(f) The payment must not be less than the amount that would have been payable had the employee taken the leave at the time the payment is made. 

(g) An agreement must not result in the employee’s remaining accrued entitlement to paid annual leave being less than four weeks. 

(h) The maximum amount of accrued paid annual leave that may be cashed out in any period of 12 months is two weeks. 

(i) The employer must keep a copy of any agreement under clause 22.8 as an employee record. 

NOTE 1 : Under section 344 of the [Fair Work] Act, an employer must not exert undue influence or undue pressure on an employee to make, or not make, an agreement under clause 22.8. 

NOTE 2: Under section 345(1) of the Act, a person must not knowingly or recklessly make a false or misleading representation about the workplace rights of another person under clause 22.8. 

NOTE 3: An example of the type of agreement required by clause 22.8 is set out at Schedule H - Agreement to Cash Out Annual Leave. There is no requirement to use the form of agreement set out at Schedule H - Agreement to Cash Out Annual Leave. 

The bottom line: Requests to cash out annual leave under a modern award are subject to agreement between an employer and an employee and must comply with the time and wages record provisions of the award. 

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