Cashing out long service leave

It is not permitted for a long service leave entitlement to be ‘cashed out’ in advance of the employee having completed the necessary continuous employment (that is prior to the leave being accrued), either:

• through a lump sum payment;
• incrementally through an extra amount paid on top of a base rate of pay; or
• through a commission payment.

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 only once the employee has completed the necessary period of continuous employment and fully accrued the entitlement.

Watch our cashing out long service leave video

A long service leave entitlement can be cashed out once an employee has completed the necessary continuous employment and fully accrued the leave (after 10 years of continuous employment and then after each subsequent 5 years of continuous employment).

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 employee who cashes out their long service leave rather than taking the leave does not accrue long service leave on the leave that is cashed out.

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.