Cash out leave entitlements (non-termination)

Cashing out all leave/ or partial cash out of entitlements (not for a termination)

There may be a situation where you might need to cash out leave entitlements for an employee, such as:

  • Annual Leave
  • Other types of leave specific to your business e.g. Sick Leave/Carers Leave

In this article, we will go through:

  • Cashing out all entitlement hours
  • Partially Cashing out entitlement hours
  • Options for cashing out entitlements when an employee moves from permanent to casual employment

Please note: If you are cashing out Long Service Leave* or other leave entitlements as part of a termination please see Termination payments.

*According to Fair Work, Long Service Leave usually can't be cashed out while the employee is still working for the business.

  See our Edit Payslips article for more details.

  You may also be interested in Adjusting leave accruals.

Cashing out all leave entitlement hours (not for a termination)

There may be a time when you are required to cash out all of an employee's leave entitlements.

An example of this could be:

  • Cashing out all Annual Leave so the employee receives payment instead of taking time off work. 

In the below example we will be cashing out Annual Leave, however, the same process can be done for other leave types if needed. 

To cash out all leave hours you will need to do the following:

  1. In the quick menu navigate to Payroll > Pay.
  2. Under Draft Payslips, select the relevant Period Ending. Type in the employee's name in Search to locate the relevant payslip.
  3. Click Action > Edit next to the employee. (If the employee does not have a payslip in the relevant pay cycle then click 'Create New Payslip' and create a payslip from scratch). 
  4. In the Pay Items, select Add entitlement.
  5. From the drop-down select the entitlement you wish to cash out and then change the method from 'Redeem' to 'Cashout'.  This will automatically apply the entire balance of the employee's accrued leave hours to cash out. 

  6. Scroll to the bottom and click on 'Calculate Totals' to update the payslip with the changes made.
  7. Then 'Preview Payslip'. Under the Entitlements Paid section there will be a section with the leave type e.g. Annual leave along with the hours redeemed and the amount paid.

  8. Select Update Payslip or Create Payslip if creating a manual payslip.

Note: Once the payslip has been updated the balances will be reflected in the Leave History and updated accordingly in the Employee Profile as well as your leave reports

Partially cash out or pro-rata payment of leave entitlements

There may be a time when you are required to partially cash out leave entitlements for an employee (not for a termination).

An example of this could be:

  • Partially cashing out 1 week out of 5 weeks available of Annual Leave (leaving 4 weeks available for the employee to take off).

In Edit Payslip > Pay Items > Entitlements you're able to select the Annual Leave: Cashout option and then enter the number of hours that you would like to cash out and pay that employee.

In the below example we will be partially cashing out Annual Leave, however, the same process can be done for other leave types if needed. 

To partially cash out leave hours you will need to do the following:

  1. In the quick menu navigate to Payroll > Pay.
  2. Under Draft Payslips, select the relevant Period Ending. Type in the employee's name in Search to locate the relevant payslip.
  3. Click Action > Edit next to the employee. (If the employee does not have a payslip in the relevant pay cycle then click 'Create New Payslip' and create a payslip from scratch).
  4. In the Pay Items, select Add entitlement.
  5. From the drop-down select the entitlement you wish to cash out and then change the method from 'Redeem' to 'Cashout'.  This will automatically apply the entire balance of the employee's accrued leave hours to cash out. However, this value can be edited if you wish to cash out less than that. 

  6. Scroll to the bottom and click on 'Calculate Totals' to update the payslip with the changes made.
  7. Then 'Preview Payslip'. Under the Entitlements Paid section, there will be a section with the leave type e.g. Annual leave along with the hours redeemed and the amount paid.

  8. Select Update Payslip or Create Payslip if creating a manual payslip.

  Tip: Add a comment to the payslip to communicate with the employee about partially cashing out their leave balances. 

Changing from permanent to casual employment

When an employee transitions from permanent to casual employment, you'll likely have to deal with their entitlements in different ways.

For example, Annual Leave will most likely be paid out, whereas Personal Leave will be forfeited by the employee and Long Service Leave might be carried over. 

This is easily done on the Employee Profile. 

  1. Add a new position to the employee, selecting Casual as the Employment Type. 
  2. After adding the position details, you will be prompted to action all the paid leave entitlements.
     
    Your options for each paid entitlement are:
    • Pay Out - The balance of the entitlement will be paid out on the final payslip for the permanent position. After which the entitlement will be removed from the profile. 

       In order for the entitlement to be paid out automatically, there must be a draft payslip created automatically (either via approving shifts or approving leave). If this does not occur, a manual payslip will need to be created and the manual cashout method applied. 
    • Carry Over - The entitlement and the balance will remain on the profile, accessible to the employee. This option is only available on entitlements that can be applied to casual employees. 
    • Delete - The entitlement and the balance will be removed from the profile when the permanent position ends. 

      In the image below you can see an example use case for each. Annual Leave will typically be paid out, Long Service Leave will be set to carry over, and Personal Leave will be deleted.

  3. If a future date is set for the casual position, what happens to the entitlements can be changed by editing them individually. As seen below, you can also easily identify which option has been selected for each entitlement.

  4. Employees may still apply for these entitlements through their Employee App or portal until the entitlements have been paid out or removed. The balances for entitlements will be updated accordingly.

  Please note: When paying out employee's entitlements during a change of employment type, the entitlement will correctly be reported as a termination payment. You can think of this as though their permanent employment was terminated so that their casual employment can begin.