Cash-Ups: The Good Bosses' Guide

A "cash up" is when an employee asks to have some of their leave given to them as a payment, instead of paid time off.

(Hope you've had your coffee, because today we're getting a little technical).

You might have somebody on your payroll who lives to work, or just feels like they get enough free time over the weekends. They're pretty keen to turn their unwanted leave into cold hard cash. But of course, there are rules.

Before you agree to a cash-up, make sure that you're meeting two essential requirements:

• The cash-up can only be for one week’s annual leave. Only. Don't ever cash out more time, even if the employee has heaps of leave built up - you'll get a good telling-off and probably end up paying a lot more than you need to.

• An annual leave cash-up can only be given if the employee has “entitled” or “due” leave (That’s leave left over from the employee’s last anniversary date). It can't be "accrued" or advanced leave.

So, you've ticked those boxes and you're ready to pay up.

Every employee has the right to take all their leave, and cash ups can’t be forced by the boss. That means you'll want to establish a bit of a paper trail.

• Get your employee to request the cash-up in writing. Because leave is protected, you need evidence that it was the employee who chose to give up their leave and asked to have it paid out.

• You should also reply in writing as to whether or not you've agreed to pay it. It's up to you! Not all employers will have the cash on-hand to pay out leave, so you don't have to pay it just because it's been requested.

Something else to note is that a cash-up will likely be taxed at a higher rate than a standard pay.

A cash up is taxed as a “lump sum” payment, like a bonus, so your employee might have a bigger slice taken out of their pie. This is because they're receiving the payment over and above their normal salary for the year. Whoever's asking for the cash-up should consider that the value will actually take a bit of a dent when it's paid this way.

Don't forget, it's your choice.

If you think cash-ups might be a regular thing, have a form available for employees to request them - this will help you stay on top of record-keeping.

If you're in a high-stress or high-risk industry, you might want to encourage your people to take their annual 4 weeks! If you have a worker who's absolutely flogging themselves and you're a bit worried about their leave build-up or their well being, you can ask them to take a wee break. You're able to request that they take up to two weeks' of their “entitled” leave, with at least 2 weeks notice.

As always, the key is to stay compliant while also taking care of your employees. If you still have questions about cash-ups, leave in general, or how PaySauce can help you be an even better boss, shoot us a message here or hit 0800 746 701.