‘Cashing out’ annual leave: How can you manage new leave provisions with your workforce?

Australian workplace reforms recently introduced by the Fair Work Commission now allow employees to voluntarily exchange annual leave for wages. This essentially allows them to ‘cash out’ their leave entitlements to enjoy the financial value, instead of taking a break.

While many employees covered by enterprise agreements are already able to ‘cash out’ their annual leave, the new clause extends the option to around two million Australians currently working under a modern award.

The Fair Work Commission inserted the clauses into almost all of Australia’s 122 workplace awards, which specify the basic pay and conditions for most occupations in Australia.

The new provision does however come with some conditions. Firstly, workers can exchange up to two weeks of annual leave every 12 months. Furthermore, pay in lieu of leave can only be taken so long as the employee still has four weeks of annual leaving remaining.

The Fair Work Commission’s decision to amend annual leave conditions has received a mixed response from workplace representatives. The Australian Chamber of Commerce and Industry welcomed the reforms as a move towards more flexible employment arrangements, while the Australian Council of Trade Unions fear that the clause could lead to a further erosion of workplace conditions.

While the debate over annual leave appears now settled with the Fair Work Commission’s amendment, the case does illustrate a common difficulty encountered by managers within many Australian workplaces.

Management decision-making is often subject to the interests and advice of a range of parties, some of whom may not agree on the best way forward. This type of situation can leave managers unsure of how to best proceed. In such an event, good decision-making needs the support and guidance of informed and impartial advisors.


iHR Australia provides sound and practical employer advisory services, with skilled and experienced consultants who can deliver valuable assistance and counsel on matters relating to Human Resources, workplace relations, or industrial relations issues.

When considering your workplace annual leave policies and management strategies, it’s important to weigh up both your organisational needs and the needs of your individual employees.

More broadly, HR professionals handle a number of complex matters and iHR’s Employer Advisory Service aims to assist, providing guidance on Workplace Relations and Human Resources issues such as:
• Applying leave provisions (sick, parental, carers, bereavement, annual)
• Understanding and applying employment contracts
• Interpreting and applying award provisions
• Dealing with (and preventing) unfair dismissal claims
• Performance management and counselling sessions
• Taking disciplinary action including delivering formal and informal warnings, and if necessary, terminating employees
• Resolving conflicts and issues between employees including claims of bullying, harassment, discrimination and sexual harassment
• Dealing with and preventing adverse action claims
• Ensuring wage rates and salaries meet legislative requirements
• Understanding and applying your organisation’s HR policies and procedures
• Making employees redundant
• Dealing with Fair Work Commission issues
• General queries about employment legislation and employers’ obligations

Many organisations in Australia have benefited from iHR Australia’s comprehensive Employer Advisory Services.

Specsavers Australia is one such client:

“We are thrilled with our relationship with iHR Australia. As Australian Employer of the Year, we recognise that people are our biggest asset. Thanks to iHR Australia, our store partners are more confident and skilled in dealing with issues regarding their staff and we have seen a large reduction in issues escalating into formal disputes. We believe the relationship our store partners have with their staff is crucial and directly translates into an improved employment brand for us.

“We pride ourselves on being a highly professional, industry leading organisation. iHR Australia helps us to make this a reality by providing truly professional advice and implementation strategies to our store partners. We are pleased not only with the service provided but the positive impacts it has had on our organisation.”