What is cashing out annual leave?

To encourage choosing rest over reward, employees can only exchange their annual leave for cash in these specific circumstances:

• When an employee leaves their employment.

• If the employee is genuinely casual or on a fixed-term agreement of less than 12 months.

• Up to 1 week per year by agreement, in accordance with section 28 of the Holidays Act.

When an employee wants to cash out the one-week per year allowance, there are several steps that need to take place including a request made in writing and negotiation in good faith. Read more in the related resources below. 

PayHero has a specific ‘Annual Leave Cashed Up’ pay item which can be added to a draft pay in payroll. This income is then taxed as a Lump Sum Payment.