Under certain circumstances, employees may wish to “cash out” annual leave. It is really easy to cash out annual leave and make sure you are meeting your obligations. To cash out annual leave for an employee, follow these simple steps:

1. You will need to create a new Pay Category called "Leave Cash Out",  set the "Units" field to Fixed. This way when you include the pay category (Leave Cash Out), in the pay run, it will not adjust the normal hours that were worked by the employee who is "cashing out".
   
   Also, "cashing out" generally does not accrue leave so by setting the "Units" to Fixed does not allow this pay category to accrue leave. See image below;
   
   
   
   
2. Once the pay category has been set up, go to the (regularly scheduled) pay run and find the employee that wants to cash out their leave - click on their name to expand the pay run record. 
   
   
3. First apply the leave to the employee’s leave balance, (i.e. deduct the hours cashed out). To do this, click the “Actions –> Adjust Leave”.
   
   
   
   
4. This will create a "Leave Adjustment" line.  You will then need to fill out the relevant fields, (see image below).  You will need to select "Annual Leave" as the leave category, and in the "Hours" field your will need to put in a minus figure to correspond to the amount of hours being "Cashed Out", (see in the image below we are cashing out 20 days) and make sure you untick the "Apply Earnings Rules" box, where indicated. Then hit Save.
   
   
   
   

5. Once the Leave Adjustment has been created we now need to insert an earnings line to pay the employee.  Using the "Actions" button again, select "Add earnings".

6. This will create an earnings line that you will need to fill in according to the amount of leave that is being "cashed out". You will then need to select the "Leave Cash Out" pay category, the one we created in step 1.  

7. Enter the the corresponding hours that you entered in as a minus in the "Leave Adjustment" row and enter the employee's normal hourly pay rate .  Then press Save.  

Once you've completed the above process your employee's pay run record should look something like this:

Explore related content

• Entering Leave Taken Learn more about how you can add leave taken either during the pay run or via the Leave requests to your organisation's payroll platform.
• Apply a Leave Request to a Pay Run Learn more about how to create a new pay run for your organisations and then add in‌ any required employee leave requests.

If you have any questions or feedback, please let us know via support@yourpayroll.io