Newsletter
Employees accruing too much leave?
Annual leave entitlements can be a massive burden on businesses because if accrued liability builds up, it can cause significant cash flow problems. If your business has employees accruing excessive amounts of annual leave, there are several things that can be done.
1. Direct employees to take annual leave
You may have the right to direct employees to take annual leave. If you are covered by the minimum employment conditions in the Workplace Relations Act, you can direct employees to take up to one quarter of their annual leave if they have accrued more than 8 weeks of leave (pro rata for part-time employees).
However, if you are subject to an award or enterprise agreement, you will need to check whether you have this right. Remember, even if an employment contract allows you to direct employees to take leave, you will be still be subject to the terms of any applicable award or enterprise agreement, or the Act.
Even though it is not provided for in the Act, it is a good idea for you to give employees at least one month's notice of a direction to take leave. For example, you might give an employee 6 months to take leave voluntarily, but let them know that if they do not take it within that period, you will direct them to take it.
2. Cash out leave
In some limited circumstances you may be able to cash out leave. You may be able to cash out leave if:
1. Direct employees to take annual leave
You may have the right to direct employees to take annual leave. If you are covered by the minimum employment conditions in the Workplace Relations Act, you can direct employees to take up to one quarter of their annual leave if they have accrued more than 8 weeks of leave (pro rata for part-time employees).
However, if you are subject to an award or enterprise agreement, you will need to check whether you have this right. Remember, even if an employment contract allows you to direct employees to take leave, you will be still be subject to the terms of any applicable award or enterprise agreement, or the Act.
Even though it is not provided for in the Act, it is a good idea for you to give employees at least one month's notice of a direction to take leave. For example, you might give an employee 6 months to take leave voluntarily, but let them know that if they do not take it within that period, you will direct them to take it.
2. Cash out leave
In some limited circumstances you may be able to cash out leave. You may be able to cash out leave if:
- You are a Western Australian employer not covered by the Act, or
- You are covered by an agreement made under the Act that provides for the cashing out of leave.
If this is the case, you can cash out up to 50% of accrued leave, but only by written agreement with the employee. However, if you do not fall into one of the above categories, then you cannot cash out leave.
3. Advance payment of leave
If you do not have the right to cash-out leave you might pay for annual leave 'in advance'. This can occur on the basis that this amount will be deducted from any annual leave payment made to the employee upon the termination of their employment. If you decide to do this, you may wish to reach an informal understanding with the employee that they will not take the leave they were paid in advance for.
In addition, your time and wages records for that employee must still show that the leave remains accrued and that it has not been taken. However, your financial records need to show that payment for the leave has been accounted for by an advance payment. (This is subject to any difference in salary that might arise between the time the advance payment was made and the time you either granted the leave or paid it out upon termination).
If we can assist you in relation to any annual leave enquiries or any employment law issue, please contact Dean Groundwater or Kevin Dwyer on 02 9525 8688 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it or This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
3. Advance payment of leave
If you do not have the right to cash-out leave you might pay for annual leave 'in advance'. This can occur on the basis that this amount will be deducted from any annual leave payment made to the employee upon the termination of their employment. If you decide to do this, you may wish to reach an informal understanding with the employee that they will not take the leave they were paid in advance for.
In addition, your time and wages records for that employee must still show that the leave remains accrued and that it has not been taken. However, your financial records need to show that payment for the leave has been accounted for by an advance payment. (This is subject to any difference in salary that might arise between the time the advance payment was made and the time you either granted the leave or paid it out upon termination).
If we can assist you in relation to any annual leave enquiries or any employment law issue, please contact Dean Groundwater or Kevin Dwyer on 02 9525 8688 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it or This e-mail address is being protected from spambots. You need JavaScript enabled to view it .