Annual Leave and Redundancy: Your Complete Entitlements Guide

Published: January 2026 | Reading time: 10 minutes

Being made redundant is a challenging experience, but understanding your entitlements helps you navigate this transition with greater confidence. When your position is made redundant in Australia, you have clear legal rights regarding the payout of your accrued annual leave, separate from any redundancy pay you might receive. This guide explains exactly what happens to your annual leave when you're made redundant and how to ensure you receive everything you're owed.

Redundancy can happen to anyone, regardless of performance or tenure, and knowing your rights beforehand means you can focus on your next steps rather than worrying about whether you're being treated fairly during the termination process.

Your Annual Leave Must Be Paid Out in Full

When your employment ends due to redundancy, your employer must pay out all accrued but untaken annual leave in your final pay. This is a legal requirement under the Fair Work Act 2009 and cannot be reduced or waived, regardless of what your employment contract says. Every hour of annual leave you've earned must be converted to a cash payment.

The payout is calculated at your current rate of pay at the time of termination. If you've received pay increases since you started accruing leave, you receive the benefit of these increases on all accrued leave, not just leave accrued since the last pay rise. This can represent significant value, particularly for long-term employees who have accumulated substantial leave balances.

Use our annual leave calculator to estimate your accrued leave before any redundancy discussions. Knowing your approximate balance helps you verify that your employer's final calculations are accurate and ensures you receive your full entitlement.

Annual Leave Payout Is Separate from Redundancy Pay

It's important to understand that your annual leave payout is a completely separate entitlement from redundancy pay. Redundancy pay, also called severance pay, is compensation for losing your job and is calculated based on your years of service. Annual leave payout is simply the value of leave you've earned but haven't yet taken.

Under the National Employment Standards, employees made redundant from businesses with 15 or more employees are entitled to redundancy pay ranging from four weeks' pay for one to two years of service up to sixteen weeks' pay for ten or more years of service. This is in addition to your annual leave payout, notice period payment, and any other entitlements you've accrued.

Small businesses with fewer than 15 employees are exempt from the redundancy pay provisions, but this doesn't affect your annual leave payout. Even if you're not entitled to redundancy pay due to the small business exemption, your employer must still pay out all accrued annual leave.

Calculating Your Annual Leave Payout

Your annual leave payout consists of all accrued but untaken annual leave calculated at your current ordinary hourly rate. For most employees, this is simply your annual leave balance in hours multiplied by your hourly rate. Part-time employees receive the same calculation based on their specific hours and rate.

If you're entitled to annual leave loading under your award or agreement, this may or may not be included in your redundancy payout depending on the specific terms. Many modern awards no longer provide leave loading, while some enterprise agreements continue to include it. Check your applicable industrial instrument or ask your employer to confirm whether leave loading applies.

Superannuation is not payable on annual leave payouts upon termination, unlike regular annual leave payments taken during employment. This means your annual leave payout is gross wages only, without additional superannuation contributions.

The Notice Period and Annual Leave

When you're made redundant, you're entitled to a notice period that varies based on your length of service and age. Your employer can choose to have you work through this notice period or pay it out as wages in lieu of notice. How your employer handles the notice period affects when your annual leave payout occurs.

If you work through your notice period, annual leave continues to accrue during this time. Your final leave balance and payout are calculated as of your actual last day of work. During the notice period, you could request to take some accrued annual leave, though your employer isn't required to approve this if there are operational reasons to have you working.

If you receive payment in lieu of notice instead of working out the period, your employment technically ends on the day you're advised of the redundancy. Your annual leave payout is calculated based on your balance at that point, plus any leave that would have accrued during the notice period had you worked it.

Using Annual Leave During a Redundancy Period

Some employees prefer to take their accrued annual leave during the notice period rather than receiving a payout. This can extend your time of formal employment, which may be advantageous for job searching, mortgage applications, or personal reasons. However, there's generally no financial benefit since the value is the same whether taken as leave or paid out.

Your employer isn't required to approve annual leave requests during a redundancy period if it would interfere with handover duties or other legitimate business needs. However, reasonable requests should generally be accommodated. If you want to take leave during your notice period, discuss this with your employer as early as possible.

Note that if you take annual leave during your notice period, the notice period typically continues to run concurrently. Taking two weeks of annual leave doesn't usually extend your notice period by two weeks. Check your award or agreement for specific provisions that might apply.

What to Check in Your Final Pay

When you receive your final pay statement after redundancy, carefully verify all components. Your final pay should include payment for any outstanding wages up to your termination date, annual leave payout at your current hourly rate, redundancy pay if applicable, and payment in lieu of notice if you didn't work out your notice period.

Request a detailed breakdown if one isn't automatically provided. This should show your annual leave balance in hours, the hourly rate used for calculation, and the total leave payout amount. Compare this against your own records and calculations to ensure accuracy.

If you believe there's an error in your annual leave payout, raise it with your employer's HR or payroll department promptly. Mistakes do happen, and most employers will correct genuine errors when they're identified. Document all communications in case you need to escalate the matter later.

Tax Implications of Redundancy Payouts

The tax treatment of redundancy payments can be complex and varies depending on the type of payment and your circumstances. Annual leave payouts are generally taxed as ordinary income at your marginal tax rate, which might push you into a higher tax bracket for that pay period.

Genuine redundancy payments receive more favorable tax treatment, with a tax-free component based on years of service. However, this favorable treatment applies to the redundancy pay itself, not to annual leave payouts. Your leave payout remains taxable regardless of how the redundancy is characterized.

Consider consulting a tax professional about the implications of your specific redundancy package. They can advise on strategies to minimize tax impact and ensure you understand how much of your final payment you'll actually receive after tax.

Your Rights If Something Goes Wrong

If your employer fails to pay your accrued annual leave upon redundancy, or you believe the calculation is incorrect, you have several options. Start by raising the issue directly with your employer in writing. Many disputes arise from simple errors that can be quickly corrected.

If your employer refuses to pay or disputes your entitlement, you can contact the Fair Work Ombudsman for free advice and assistance. They can help you understand your rights, attempt to mediate the dispute, and if necessary, take enforcement action against employers who fail to meet their obligations.

You have six years from the date of underpayment to make a claim for unpaid entitlements, including annual leave. While it's best to resolve issues promptly, don't assume you've lost your rights if time has passed since your redundancy.

Conclusion

When you're made redundant, your accrued annual leave represents hard-earned entitlements that must be paid out in full. This payout is separate from redundancy pay and is calculated at your current rate of pay. Understanding these rights helps you ensure fair treatment during what can be a difficult transition period.

Before any redundancy discussions, use our annual leave calculator to estimate your accrued balance. This gives you a benchmark for verifying your employer's calculations and advocating for your full entitlements.

While redundancy is never welcome news, knowing that your annual leave balance will be fully compensated provides some financial cushion as you move forward. Your leave entitlements are protected by law, and employers who fail to pay them face serious consequences. Focus on your next opportunity knowing that your accrued benefits are secure.