The Fair Work Commission has handed down a decision that will allow most employees to cash out some of their annual leave entitlements. These changes to modern awards apply from the first pay period on or after 29 July 2016.

The changes apply to 112 modern awards, although the Fair Work Commission is still considering whether other awards should be similarly varied. Annual leave can only be cashed out when allowed under an award or enterprise agreement, or as permitted by the Fair Work Act 2009 for award /enterprise agreement free employees.

Employers and employees need to strictly comply with the provisions of the applicable award or enterprise agreement and the Fair Work Act 2009 when cashing out annual leave. Common requirements for cashing out annual leave now include:

  • after cashing out annual leave an employee must still have an entitlement to at least 4 weeks’ annual leave;
  • there must be a written agreement between the employer and employee each time annual leave is cashed out;
  • a maximum of two weeks’ annual leave may be cashed out per year by an award covered employee;
  • an employee can't be forced or pressured by an employer to cash out annual leave; and
  • the employee must be paid at least the same amount for cashed out annual leave as the employee would have been paid if they had taken the leave.

If you need assistance with leave entitlements, awards and enterprise agreements or any other workplace matter, please contact:

Jim Rutherford
Harwood Andrews
T: 03 5226 8579

Sonia McCabe
Senior Associate
Harwood Andrews
T: 03 5226 8558

This article was written with the assistance of Jenni Walker, Graduate Lawyer.