Skip to main content
English (Canada) English (United Kingdom) English (Malaysia) English (New Zealand) English (Singapore)

Cash out annual leave

Updated

Available for the following plans: Employment Lite, Employment Plus
Available for the following Payroll plans: Standard, Premium, Core Payroll
Available for the following user access levels: Admin

You can cash out an employee's annual leave via the Payroll classicplatform in a pay run. 

Do note that when cashing out annual leave, you are required to pay super contributions as normal. The platform will calculate this automatically.

More information on cashing out Annual Leave can be found here.

What you need to do

Step 1: Creating a pay category
  1. Log in to your payroll platform.
  2. Click the   Business Menu.
  3. Click the Payroll Settings submenu.
  4. Under Pay Run Settings, click Pay Categories.
  5. Click Add.

    Screenshot of Pay Categories settings page for Casper's Training showing list of pay categories including Annual Leave Taken, Community Service Leave Taken, Compassionate Leave Taken, ETP Leave Earning, Fixed Unit of Work, Ordinary Hours, Overtime Hours, Personal/Carer's Leave Taken, Redundancy, Salaried Employees, Time in lieu taken, and Week Day Hours Worked, with Add button highlighted in green

  1. Name the pay category Leave Cash Out.
  2. Set the Units field to Fixed.
    Screenshot of Pay Categories settings showing Leave Cash Out pay category expanded with Name set to Leave Cash Out and Units set to Fixed highlighted in red boxes, with 11% super rate, Payment classification Default, and Add linked category button
  3. Click Payment classification to open the menu and select the appropriate payment option.
    See this article for further information regarding payment types.

This way when you include the pay category (Leave Cash Out) in the Pay Run, it will not adjust the normal hours that were worked by the employee cashing out.

Cashing out generally does not accrue leave, so setting Units to Fixed does not allow this pay category to accrue leave.

Important

If you pay leave loading, you will also need to create a separate or new Leave Cash Out - Leave Loading pay category. This is because you will be manually paying the loading, and you cannot use the "system" leave loading pay category.

Set it up the same way as explained above for Leave Cash Out.

Step 2: Finding the employee
  1. Click the Pay Runs menu.
  2. Click the regularly scheduled Pay Run.
  3. Find the employee who wants to cash out their leave.
  4. Click on their name to expand the Pay Run record.
Step 3: Applying the leave to the employee's leave balance
  1. After selecting the employee, click Actions.
  2. Click Adjust Leave to create a Leave Adjustment line.
    Screenshot of pay run for Charlie Anderson showing Earnings section with Permanent - Ordinary Hours at 43 hours $1,296.45 and Actions dropdown expanded with Adjust leave option highlighted in a red box
  3. Select Annual Leave as the leave category.
  4. In the Hours field, put a minus figure corresponding hours being cashed out. In the image below, we are cashing out 20 hours.
  5. Uncheck the Apply Earnings Rules box.  Screenshot of pay run for Charlie Anderson showing Earnings with Leave Cash Out as Other Earnings at 20 units $603.00 using METHOD A Lump Sum Payment over 2 weekly pay periods, and Leave Adjustments section showing Annual Leave at -20 hours highlighted in red
  6. Click Save.
Step 4: Inserting an earnings line
  1. Click Actions.
  2. Select Add Lump Sum to create an earnings line. Screenshot of pay run for Charlie Anderson showing Actions dropdown expanded with Add lump sum payment highlighted in a red box, and Leave Accrued section showing balances for Annual Leave, Compassionate Leave, Long Service Leave, Training Leave, and Unpaid Pandemic Leave
  3. Select the Leave Cash Out pay category that was created in Step 1.  
  4. Select Method A for the tax calculation.
  5. Insert the number of pay periods you want this payment to be spread over. This will adjust the PAYG accordingly. 

Important

As leave accrues across the year, you can spread the PAYG tax across the year. Enter the number of pay periods that occur in one year for this employee.

  1. Put the number of hours you entered as a minus in the Leave Adjustment row in Step 4. This time, do not put a minus sign.
  2. Enter the employee's normal hourly pay rate. Screenshot of pay run for Charlie Anderson showing Leave Cash Out as Other Earnings at 20 units $30.15 rate $603.00 with METHOD A Lump Sum Payment over 2 weekly pay periods, and a dropdown showing Method A and Method B(ii) options with Leave Cash Out, 20, and 30.15 highlighted in red boxes
  3. Click Save.

Important

You will be using the lump sum payment method to pay this leave to aggregate the tax across multiple pay periods. But this feature does not work if there are not any other "ordinary" earnings in the pay run.

See Further Information at the bottom of this article for more details on this.

Step 5: Paying leave loading
  1. If you are paying Leave Loading, follow Steps 5 and 6 again.
  2. Choose Leave Cash Out - Leave Loading as the pay category.
  3. Enter an hourly pay rate that is 17.5% of the employee's normal hourly pay rate.

Further information

No other ordinary earnings

If there are no other ordinary earnings to be paid in the Pay Run, you may use Take Leave. Then:

  1. Pay the leave out in advance/cash out as you would any other leave.
  2. Manually work out the amount of tax that should be paid.
  3. Use the Adjust PAYG option from the Actions button to adjust the amount of PAYG to be deducted.
  4. Enter a negative adjustment to reduce the automatically calculated amount.

Related articles