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How paid leave accrues, and what an unused day is worth

Leave usually accrues monthly rather than arriving all at once in January. Knowing your balance at a given date — and what a day is worth in cash — matters most when you are leaving a job or deciding whether to carry days over.

How it works

• Divides the annual entitlement across the year to give a monthly accrual rate.
• Multiplies by months worked to give the balance earned at any point.
• Converts days into money using the daily rate, which is what an unused day is worth at settlement.

monthly accrual = annual days ÷ 12
earned to date  = monthly accrual × months worked

daily rate  = annual salary ÷ working days (typically 260)
cash value  = days × daily rate

Worked example

A 25-day annual entitlement on a 90,000 salary, seven months into the year, with six days unused.

1. monthly accrual = 25 ÷ 12 = 2.0833 days
2. earned after seven months = 2.0833 × 7 = 14.58 days
3. daily rate = 90,000 ÷ 260 = 346.15
4. six unused days = 6 × 346.15 = 2,076.92

14.58 days earned by the end of July, and six unused days worth 2,076.92 in cash. Leaving days on the table at year end is the same as declining that amount.

Reading the result

• Taking leave early in the year usually means taking days you have not yet accrued. Most employers allow this, but if you leave mid-year having taken more than you earned, the difference is normally deducted from your final pay.
• Carry-over rules vary and are often stricter than people assume. Some employers allow none, some allow a few days until March, and statutory minimum leave frequently cannot be paid out in lieu while you remain employed.
• The daily rate for settlement is not always salary ÷ 260. Some jurisdictions and contracts use an average of recent earnings including bonuses and overtime, which can make a leaving payment noticeably larger than this estimate.
• Public holidays are usually separate from annual leave, but not always — check whether your entitlement is quoted inclusive or exclusive of them, since that is a difference of eight to twelve days.

Common questions

What happens to unused leave when I resign?

Accrued but untaken leave is normally paid out with your final salary at your daily rate. In the example that is 346.15 a day. Where you have taken more than accrued, the balance usually works the other way and is deducted.

Is it better to take the days or the money?

Take the days. While employed you generally cannot exchange statutory minimum leave for cash, and beyond the legal point, the days are worth more than their cash value — you are paid either way, so the leave is effectively free time you have already earned.