Cashing up annual leave

With the Christmas break still fresh in most of our minds, the prospect of annual leave might seem a little way off but leave liabilities for employers make it a very real topic year round. Many employers have a significant amount of annual leave owing. This is often an unfunded liability and understandably many business owners want to actively manage this.

Many of our clients are not aware that their employees can make a request for a lump sum payment of holiday pay in lieu of taking the time off. There is a limit of one week per annum.

Of course, there are a couple of things that need to be taken into consideration.

Firstly, you can’t force your employee to take this option. The request must come from them but there is nothing stopping you from publicising it.

Secondly, there’s absolutely no compulsion for you as an employer to agree to an employee’s request. If you wish to cash up annual leave, that’s entirely in your discretion. As an employer you are entitled to have a policy that excludes employees from applying for a lump sum payout.

In the absence of a policy and given that employers owe employees a duty of care, any decision to decline an application should be reasonable.

We hope that gives food for thought as you look to manage costs in your annual budgeting process. Oh, and one piece of advice… make sure you plan your next holiday now before the last one becomes a dim, distant memory. We all need something to look forward to.