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Cashing out annual leave is where an employee is paid the value of annual leave instead of taking the time off work.
Check the rules!
There are rules and regulations that govern the cashing out of annual leave, so first check with the appropriate regulatory body about the rules that affect you. A good place to start is the Fair Work Ombudsman.
The easiest way to handle this in AccountRight is to process a separate pay run just for the cashed out annual leave. This makes it clear how much leave is being cashed out and reduces the employee's leave balance.
Once you've recorded the employee's regular pay, here's how to process a separate pay for the cashed out leave.
To cash out annual leave
- Start a new pay run for the employee, using the same dates as the regular pay you've just recorded.
- Click the blue zoom arrow () to edit their pay.
- Remove all hours and amounts from the pay.
- Enter the number of annual leave hours being cashed out against the annual leave wage category.
If the employee shouldn't accrue entitlements on cashed out leave payments, remove all hours from the leave entitlement categories. If you're not sure if this applies in your business, check with an accounting advisor or the relevant regulatory body in your state or territory.
What about super?
Cashed out annual leave is generally included in an employee's ordinary time earnings (OTE) for the purpose of calculating Superannuation Guarantee contributions. For clarification, check with an accounting advisor or the ATO.
- In the Memo field, enter a description for this pay, such as "Cashing out 20 hours annual leave".
- Finish processing the pay as normal.