Top 17 Facts About Annual Leave Payout on Resignation You Must Know
Resigning from your job can be a stressful transition, and one of the biggest questions most professionals ask is: What happens to my annual leave when I resign? If you’ve accrued leave, you could be entitled to a decent payout – but there’s a lot more to it than just a final paycheck. Let’s break down the ins and outs of annual leave payout on resignation in Australia so you can leave your role with confidence and your benefits intact.
Understanding Annual Leave in Australia
What is Annual Leave?
Annual leave is a form of paid time off provided to full-time and part-time employees in Australia. Under the Fair Work Act 2009, full-time workers are entitled to four weeks of annual leave for every year of service, while shift workers may be entitled to more.
This leave continues to accumulate even during periods like paid leave or public holidays, and serves as a vital component of your total remuneration package.
How Annual Leave Accrues During Employment
Leave accrues progressively based on your regular working hours. For example, a full-time employee working 38 hours a week earns approximately 2.92 hours of leave per week. You can check your leave balance through your payslip or HR portal to stay informed about your entitlements.
What Happens to Annual Leave When You Resign?
Is Annual Leave Paid Out on Termination?
Yes, absolutely. When your employment ends, your employer must pay you for any unused annual leave you’ve accrued during your time at the company. This payout is required by law and must be included in your final payment.
Can You Resign While on Annual Leave?
Technically, yes. You can resign while on annual leave, and your notice period can begin during your leave if both parties agree. However, this may affect how your final pay is calculated, depending on how your employer treats leave days during resignation.
Annual Leave Payout on Termination: Legal Rights
According to Fair Work guidelines, unused leave must be paid out at your base rate of pay at the time of termination. This does not include bonuses, loadings, or allowances unless your contract or award states otherwise.
Employers are obligated to make this payout regardless of the reason for termination – whether it's resignation, redundancy, or dismissal.
Annual Leave Entitlements Upon Resignation
Payment for Unused Annual Leave
The most straightforward benefit is that you get paid for any accrued but unused leave. This is a lump sum and will be reflected in your final payslip. For professionals with several years of service, this can amount to thousands of dollars.
Tax Implications of Annual Leave Payout
Annual leave payouts are taxed, but the tax rate may vary depending on how they are categorised (genuine redundancy vs. standard resignation). Generally, the payout is added to your final income and taxed accordingly. Check with a tax advisor or use the ATO’s lump sum calculator for clarity.
FAQs Around Resignation and Annual Leave
Can You Resign While on Sick Leave in Australia?
Yes. You're allowed to resign even while on approved sick leave. However, the notice period still applies, and your employer may request medical certificates as per their usual policy.
Is Annual Leave Paid Out After Resignation Automatically?
It should be, yes. Employers are legally required to pay out all unused annual leave. If you don’t receive it in your final payment, follow up immediately and seek help from Fair Work if needed.
Important Legal Considerations and Exceptions
What if the Employer Refuses to Pay?
If an employer refuses to pay your leave entitlements, you have the right to complain to the Fair Work Ombudsman. They can issue fines or take legal action to recover the owed amount.
Notice Period vs Annual Leave Days
You can't usually substitute your notice period with annual leave unless your employer agrees. Some employers will let you use accrued leave during the notice period, but it's not a legal obligation on their part.
Strategies to Maximise Your Annual Leave Payout
Planning Your Resignation Date Strategically
To get the most from your payout, consider resigning after your leave anniversary date to accrue a full year’s worth of leave. Aligning your resignation with pay cycles can also simplify calculations and help with cash flow.
Combining Annual Leave with Notice Period
Some professionals strategically combine their notice period with annual leave to transition smoothly to a new job or enjoy a break. Always discuss this with HR first and get any agreements in writing.
How Resume Services Can Help You Navigate Resignation Transitions
Aligning Your Exit Strategy With Your Next Career Move
Knowing your rights around annual leave payout is important, but equally crucial is what you do next. A professional resume can open doors more quickly and make your career transition smoother.
Boosting Your Resume During Your Notice Period
Use your notice period to refine your resume and LinkedIn profile, especially if you’re seeking a promotion or a career switch. Services like The Perfect Resume specialise in crafting impactful resumes that align with your career goals.
Get Expert Help for Your Career Shift
Free Resume Review: The Perfect Resume Offer
If you're considering resigning or transitioning to a new career, don’t go it alone. Get a free resume review by sending your current resume to info@theperfectresume.com.au. Their expert writers can help you turn your resignation into a stepping stone toward your next significant role.
✅ Frequently Asked Questions
Q1: What happens to my annual leave if I resign without notice?
A1: You’re still entitled to unused annual leave, but your employer may deduct payment instead of notice.
Q2: Do casual employees get an annual leave payout on resignation?
A2: Casual workers generally don’t accrue annual leave, so no payout applies unless specified in the award or agreement.
Q3: How is annual leave payout calculated?
A3: It’s calculated based on your base rate of pay multiplied by your accrued leave hours.
Q4: Is superannuation paid on annual leave payout?
A4: No, employers are not obligated to pay super on unused annual leave unless stated in your contract.
Q5: Can I cash out my annual leave instead of taking it before resigning?
A5: Only if your award or agreement allows and you follow the required procedures.
Q6: How long does it take to receive the annual leave payout after resignation?
A6: Typically, it’s paid in your final pay within 7 days of your employment ending.