Our News

Why you shouldn’t cash out annual leave - News.com

By Alan J. McDonald


McDonald Murholme Managing Director Alan McDonald comments on the importance of not ‘cashing out’ your annual leave to ensure a healthy work/life balance.

See below article for further details

Why you shouldn’t cash out annual leave

YOU may be tempted to cash out that accrued annual leave, but one legal expert has warned it may not be a good idea.

Last week, a new clause came into effect in 122 workplace agreements covering around two million Australians which gives workers the right to convert excess annual leave to cash.

The changes were inserted into the agreements by the Fair Work Commission after lobbying from business groups calling for more flexible working arrangements.

Under the new clauses, employees can cash out two weeks’ worth of accrued annual leave every 12 months, provided they still have four weeks remaining afterwards.

Employment law expert Alan McDonald, managing director of McDonald Murholme, said the scheme was a further win for employers, not employees.

“We can all find reasons why we need the money, but really what people need is recreation time,” he said. “We know a lot about the effect of overwork on mental health, and one of the best ways to deal with it is to take a holiday.”

Mr McDonald said there was a real risk employers would exploit the change by pushing employees to take the money.

Many public sector employees such as truck drivers and disability workers may have much more than four weeks’ annual leave accrued would never surrender it for cash because they need the time to allow them to recover from difficult and stressful work, he said.

“However private sector employees should be entitled to at least four weeks every year to assist in a work-life balance which has been long recognised as part of the Australian standard of living,” he said.

“Such a valuable hard won benefit should not be surrendered to globalisation where people endure a lower standard of living and less recreational time. No one ever says on their deathbed, ‘I should have spent more time at work.’”

Mr McDonald said it was the “thin edge of the wedge”.

“My concern is that if people don’t look after themselves, then ultimately they put more pressure on the social welfare and the health system,” he said.

“It’s about what’s good for the country, not the employer or the worker.”

James Pearson, chief executive of the Australian Chamber of Commerce and Industry, last week said the FWC decision showed it was “prepared to listen to the needs of business”.

“While employers did not get everything they wanted, the reasonable changes will help businesses better manage annual leave,” he said in a statement.

Mr Pearson said the proceedings highlighted the lack of flexibility in the modern award system, and that ACCI had worked hard to secure “sensible changes”.

Reference: Why you shouldn’t cash out annual leave’, News.com, 8 August 2016.