Unused Annual Leave: When Can an Employee Get Paid for It?

One of the most common questions when employment ends is what happens to unused annual leave. Can the employer simply pay for the unused days, or must the employee use them before leaving?

This is important for both employees and employers because the law clearly explains when annual leave must be used and when payment for unused leave is allowed.

CAN ANNUAL LEAVE BE REPLACED WITH MONEY?

While an employee is still working, annual leave cannot be replaced with money.

An employee cannot give up their right to annual leave, and an employer cannot refuse to allow the employee to take it. The purpose of annual leave is to give employees time to rest and protect their health, not to earn extra money.

WHEN IS AN EMPLOYEE ENTITLED TO PAYMENT FOR UNUSED ANNUAL LEAVE?

An employee can receive payment for unused annual leave only when their employment ends and they no longer have the chance to use their remaining leave days.

In that case, the employee may claim compensation for unused annual leave if the leave was not used through no fault of their own.

EMPLOYER'S OBLIGATION BEFORE EMPLOYMENT ENDS

Before paying compensation, the employer should first give the employee the opportunity to use their annual leave before the last working day.

In practice, this means the employer should organize work so that the employee can take the leave days they have earned. Payment should be considered only if using the leave is not possible.

CAN THE EMPLOYER AVOID PAYING COMPENSATION?

The employer does not have to pay compensation if they can prove that the employee had the opportunity to use their annual leave but chose not to.

For example, if the employee was offered annual leave and refused to take it, the employer may not be responsible for paying compensation.

HOW IS THE COMPENSATION CALCULATED?

The amount of compensation depends on:

• the number of unused annual leave days; and
• the employee's average salary during the year (or part of the year) in which they earned the right to that leave.

Unused annual leave cannot be paid out while the employment relationship is ongoing because the law requires employees to actually use their leave. However, when employment ends, an employee may be entitled to compensation for unused annual leave if they did not have a real opportunity to use it.

For this reason, both employers and employees should understand the rules on annual leave to avoid disputes and ensure that the law is applied correctly.