When you resign from a job in Australia, your employer cannot simply wipe your unused annual leave. Under the National Employment Standards in the Fair Work Act, every hour of annual leave you have accrued but not taken must be paid out in your final pay — including annual leave loading, if you would have received it when taking the leave. This guide explains exactly what you are owed, how the payout is calculated, how it is taxed, and what to do if it does not arrive.
If you want to estimate your own payout before you hand in your notice, the annual leave calculator will work through the numbers for your rate, hours and leave balance.
The rule: all unused annual leave is paid out
Section 90(2) of the Fair Work Act requires that when employment ends — for any reason, including resignation, dismissal or redundancy — the employer must pay the employee the amount that would have been payable had the employee taken the accrued leave. There is no minimum service period. Even if you resign after one month, you are entitled to the pro-rata annual leave you accrued during that month.
The entitlement covers:
- Full-time employees: 4 weeks of paid annual leave per year of service (5 weeks for some shiftworkers), accruing progressively.
- Part-time employees: the same entitlement on a pro-rata basis, according to their ordinary hours.
- Leave carried over from previous years, including any balance above 4 weeks.
- Leave accrued in your final, part-year period — accrual does not stop because you are leaving.
Casual employees do not accrue annual leave and therefore receive no leave payout on termination. Their casual loading — usually 25% — is paid in lieu of leave entitlements, among other things. If you are unsure whether you are casual or permanent, that classification decides the whole question, so it is worth confirming before you resign.
Leave loading must be included
This is the part many employers — and employees — get wrong. If you are entitled to annual leave loading when you take leave, usually 17.5% on top of your base rate under many modern awards, that loading must also be paid on your untaken leave when employment ends. The Fair Work Ombudsman is explicit: the payout must be the same amount you would have been paid had you taken the leave, including the loading.
Crucially, this applies even if your award, enterprise agreement or employment contract says loading is not paid on termination. The National Employment Standards override any clause that tries to exclude it. If a contract or award clause says otherwise, it has no effect to the extent that it contradicts the NES.
Note that not every worker gets leave loading. It is not a national minimum entitlement in itself — it comes from your award, agreement or contract. Award-free employees on a common-law contract may have no loading entitlement at all, in which case the payout is at base rate only. Check your award or agreement before assuming 17.5% applies to you.
How your annual leave payout is calculated
The formula is simple: your untaken leave hours multiplied by your base hourly rate at the time of termination, plus loading if applicable.
Example 1 — with loading. You earn $35 an hour, work 7.6 hours a day, and have 12 days (91.2 hours) of untaken annual leave. Your award provides 17.5% loading.
| Step | Calculation | Amount |
|---|---|---|
| Base payout | 91.2 hours × $35 | $3,192.00 |
| Leave loading | 17.5% × $3,192 | $558.60 |
| Total payout | $3,750.60 |
Example 2 — salaried worker, no loading. You earn $80,000 a year and have 3 weeks of untaken leave. Your weekly pay is $1,538.46, so 3 weeks pays out at $4,615.38, with no loading added because your agreement provides none.
Example 3 — part-time worker. You work 22.8 hours a week (three days) at $30 an hour and have 45.6 hours banked — the equivalent of two of your working weeks. Your payout is 45.6 × $30 = $1,368, plus loading if your award provides it. Part-time leave is measured in your ordinary hours, not in calendar weeks, which is why your balance may look smaller than a full-timer’s while being worth exactly the same proportion of your pay.
One common mistake is using an old pay rate. The payout is calculated at your base rate of pay at the time your employment ends, not the rate when the leave was accrued. If you received a pay rise during the year, your whole balance pays out at the new rate.
How your payout is taxed
Unused annual leave paid on termination is taxed as part of your final pay, not concessionally. Unlike a genuine redundancy payment, which has a tax-free component, an annual leave payout on resignation is simply added to your assessable income in the year you receive it and taxed at your marginal rate, with PAYG withholding applied by your employer under the ATO’s withholding schedules for termination payments.
Two practical consequences follow. First, a large payout can push part of your income into a higher tax bracket in that financial year — a $4,000 payout on top of a $65,000 salary is taxed partly at 30%, which is still your normal marginal rate, but it is worth knowing before you spend it. Second, if you resign close to 30 June, the payout lands in that year’s tax return, so timing your resignation across financial years can change the tax outcome. This is general information, not tax advice — for a large balance, a quick check with your accountant is worthwhile.
Superannuation is also payable on unused annual leave paid on termination, because the payment is ordinary time earnings. Your employer should contribute the 12% superannuation guarantee on the payout amount, just as it would on ordinary wages. Check your super fund after your final pay lands — unpaid super on termination payments is a common oversight.
When should you receive your final pay?
Your final pay, including the leave payout, should generally be paid within 7 days of your employment ending, unless your award or agreement sets a different timeframe. It should include:
- Your unused annual leave payout, including loading where applicable
- Pay for your notice period, or payment in lieu of notice if you are not required to work it
- Any outstanding wages, overtime and allowances
- Long service leave, if you have reached the entitlement threshold in your state or territory
- Redundancy pay, if your role was made redundant rather than resigned
Unused sick leave — personal/carer’s leave — is not paid out on termination. That balance simply ends with your employment, which is one reason employees sometimes use accrued sick leave they genuinely need before resigning, rather than treating it as a payout they will never receive.
Should you take your leave before resigning?
Sometimes it is better to take your annual leave and then resign, and sometimes it is better to take the payout. Taking the leave keeps you employed and accruing entitlements — including further annual leave and sick leave — for the duration of the leave, and your super keeps being paid. It also gives you a paid break to job-hunt. Taking the payout gives you a lump sum sooner, which suits a clean break or an immediate start elsewhere. There is no universally right answer: compare the lump sum against the value of the extra accrual and the break itself. One caution — you cannot be forced to take leave instead of a payout, and your employer cannot refuse a payout that the NES requires.
What to do if your payout is wrong or missing
- Check your final payslip against your own calculation: leave balance in hours, base rate, loading percentage, and the tax withheld.
- Raise it in writing with your employer or payroll, citing section 90(2) of the Fair Work Act and your award’s loading clause.
- Contact the Fair Work Ombudsman if the employer refuses or does not respond. Underpayment claims can be made for up to 6 years after the underpayment arose.
- Keep your records — payslips, your employment contract, your award, and any leave balance statements — because the burden of proving the balance often turns on paperwork.
Frequently asked questions
Do I get paid out for unused annual leave when I resign?
Yes. Under the National Employment Standards, all accrued but untaken annual leave must be paid out when your employment ends, whatever the reason for leaving, including resignation. There is no minimum service period.
Is leave loading paid on annual leave payout?
Yes, if you would have received loading when taking the leave. The payout must equal what you would have been paid had you taken the leave, including the 17.5% loading where your award or agreement provides it — even if a clause purports to exclude loading on termination.
How is annual leave payout calculated?
Multiply your untaken leave hours by your base hourly rate at termination, then add leave loading if applicable. For example, 91.2 hours at $35 an hour is $3,192, plus 17.5% loading of $558.60, for a total of $3,750.60.
Is annual leave payout taxed?
Yes. It is taxed as ordinary income in the year you receive it, with PAYG withholding applied. Unlike genuine redundancy pay, it has no concessional tax-free component.
Do casuals get an annual leave payout?
No. Casual employees do not accrue annual leave, so there is nothing to pay out. Their casual loading compensates for the absence of leave entitlements.
Is unused sick leave paid out when I resign?
No. Unused personal/carer’s leave is not paid out on termination — only annual leave (and long service leave, where the threshold is met) is.
The bottom line
On resignation you are owed every hour of annual leave you accrued but did not take, paid at your final base rate, plus leave loading if your award or agreement provides it — and no contract clause can take that loading away. Work out your balance in hours, run it through the annual leave calculator, check your final payslip against your own figure, and chase it promptly if it is short. It is your money, earned shift by shift, and the law is squarely on your side.