Posted on: Oct 22, 2013
An employee is entitled to four weeks of annual leave. The employee has a large amount of annual leave owing. Both the employer and the employee have agreed that the employee can cash up any portion of the annual leave entitlement.
Can the employee cash up more than one week per annum of annual leave if both employee and employer are in agreement?
No! It is illegal to cash up more than one week of annual leave per annum. Only a maximum of one week can be paid out.
Any employment agreement that excludes, restricts or reduces an employee’s entitlement has no effect to the extent that it does so. This does not mean that the entire employment agreement is rendered void because of this breach. Rather, the agreement is enforceable and operates until it starts to deprive the employee of his or her minimum entitlements.
The annual holiday entitlement has two dimensions: time and money. The employer must not only pay the employee for annual holidays, but must also allow the employee the time off work (these are minimum entitlements). This is why it is not possible to cash up more than one week of the annual holiday entitlement.
The bar on cashing up annual holidays applies only to the statutory entitlement provided by the Holidays Act 2003. An employee who enjoys a greater entitlement under his or her employment agreement can at any time agree to vary the agreement and accept an agreed cash value for annual holidays in excess of the minimum entitlement. That is not the case here.
This article, and any information contained on our website is necessarily brief and general in nature, and should not be substituted for professional advice. You should always seek professional advice before taking any action in relation to the matters addressed.