Long service leave - Cashing out long service leave

This page is for: 
Employee / workerEmployer

This page outlines the requirements for cashing out a long service leave entitlement under the WA Long Service Leave Act.

Visit the main Long Service Leave page for links to other information on long service leave in Western Australia including who is covered by the WA Long Service Leave Act.

An employer and employee may agree to cash out some or all of an employee's long service leave once the employee has completed the necessary period of continuous employment and accrued the leave. 

A long service leave entitlement cannot be cashed out in advance of the employee having completed the necessary continuous employment (i.e. prior to the leave being accrued), either through a lump sum payment or a loaded up base rate of pay or commission payment.

The employee must be given an adequate benefit for the leave they have cashed out.

A benefit is not adequate unless the employee is paid at least the amount they would have received had they taken the leave. This is to ensure that an employee who cashes out accrued long service leave is not financially worse off for cashing out their leave than taking the leave.

An agreement to cash out long service leave must be in writing and signed by the employer and employee.

The employer must keep a copy of the written agreement, including details of the benefit for, and the amount of, long service leave that was foregone, and when the benefit was paid.

An example Emma is currently saving hard for her wedding next year. She has worked 38 hours per week for her employer for 11 years. She asks her employer to cash out 4 weeks of the 8.667 weeks’ leave she has accrued. Emma’s employer Ryan writes an agreement for both to sign, specifying that Emma will receive 4 weeks’ pay in lieu of taking 4 weeks' long service leave. Ryan pays Emma 4 weeks’ leave at 38 hours per week and according to her current ordinary rate of pay. Ryan keeps a copy of this agreement with her time and wages records and in Emma’s employee file.

There are specific record keeping requirements when long service leave is cashed out. Visit the What employment records must be kept? page for details.

Leave accruals on cashed out long service leave

The WA Long Service Leave Act does not require accrual of leave on long service leave that is cashed out and not taken.

An employee does not accrue long service leave for long service leave that is cashed out and not taken.

State system employees do not accrue annual leave or personal leave on long service leave that is cashed out and not taken. National system employees may wish to check with the Fair Work Ombudsman on 13 13 94 for queries about annual leave and personal leave entitlements.

 

Last modified: