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Long service leave - Cashing out long service leave
- Under the WA Long Service Leave Act, an employer and employee are able to agree to cash out some or all of an employee's long service leave once the employee has fully accrued a long service leave entitlement.
- A long service leave entitlement cannot be cashed out in advance of the employee having accrued a long service leave entitlement, either through a lump sum payment or incrementally through an extra amount paid on top of a base rate of pay or commission payment.
You can check the coverage of the Long Service Leave Act on the Long service leave – Who is covered by the Long Service Leave Act page and find links to other information on our main Long service leave page.
Watch our video on this topic
The Cashing out long service leave video discusses the requirements for cashing out long service leave entitlements under 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 fully 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 incrementally through an extra amount paid on top of a base rate of pay or commission payment.
When an employee cashes out long service leave, they must be paid at least the amount of ordinary pay 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 amount of leave and the dollar value of the long service leave cashed out.
An example:
Emma has worked for Ryan for 11 years, and has accrued a long service leave entitlement for 8.667 weeks after 10 years’ continuous employment.
Emma requests to cash out 4 weeks of the 8.667 weeks’ leave she has accrued. Ryan agrees to this, and he prepares a written agreement for them both to sign, specifying that Emma will receive an amount equivalent to 4 weeks’ salary as payment for the cashed out long service leave.
Ryan keeps a copy of this agreement with his employment records and in Emma’s employee file.
There are specific record keeping requirements when long service leave is cashed out. Visit the Long service leave – record keeping obligations 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.
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