Section 93 of the Fair Work Act 2009 stipulates that a Modern Award or Enterprise agreement may include the provision for Cashing out of Paid Annual Leave upon request by an Employee. However, such a request can only be approved if it meets all of the following conditions:

A Cash-Out Annual Leave written agreement must be made each time Annual Leave is cashed out
The employee needs to have at least 4 weeks of annual leave left after the Cash-out
The payment for the Cashed out annual leave must be the same as what the employee would be paid if they took leave
Parents approval must be obtained for employees under 18 years old
Employees can only cash out a maximum of 2 weeks per calendar year.

Cashing Out Leave Under a Registered Agreement

Not all Modern Awards allow cashing out of Annual Leave, Employers should first check their specific Industry Agreement and assess whether Annual Leave can be cashed out or not. Some Awards may also state a different number of weeks of Annual Leave to be cashed out per year.

Review the Employee's Annual Leave Balances

Employees can only cash out a maximum of 2 weeks per calendar year, after the Cash Out payment at least 4 weeks of accrued leave must be left in the Employee's Annual Leave Balance. Therefore once you subtract the Leave Cash Our hours, the remaining balance should be set to 152 Hours.

Go to Employees > List
Search for the Employee who has requested to have their Annual Leave Cash Out
Select the [Leave Balances] Tab

è The Employee Leave Balances Tab
Make sure the current Annual Leave Balances will have at least 152 hours after you process the Annual Leave Cash Out.

Process the Cash Out Leave Request

Calculate the Annual Leave Cash Out gross amount (Pay Rate + 17.5% Leave Loading (if applicable) * number of hours paid)
Process your Pay Run as per normal then open the Employee requesting the Leave Cash out
Click on [Actions] > Add lump sum payment

è The Employee pay record - Additional Lump Sum Line
In the Lump Sum line select the Annual Leave Cash Out Pay Item and set the Leave Cash out line as follows:
- Notes > Type the period paid, the rate paid and the applicable Leave Loading applied
- Units > Type: 1
- Rate > Type the Gross amount of Leave Cash Out
- Select a Calculation Method > Select: Method A Lump Sum Payment over 52 weekly pay periods
Click on [Actions] > Adjust Leave

è The Employee pay record - Additional Leave Adjustment Line
In the Leave Adjustments line select the Annual Leave Pay Category and set the Leave Adjustment line as follows:
- Notes > type: Annual Leave Cashed out
- Apply Earnings Rules > Disable this option
- Hours > Type the total number of hours of Annual Leave cashed out
Click on [Save]