A job is being left. The reason is not important. As loose ends are tied up, a question is often asked. What about banked but unused vacation days? It is wondered if they disappear. Or could a cash payment be made for them? Today, a deep dive is being taken into this topic. The details of getting paid for unused annual leave are being explored.
Many sources were looked through. Your notes were included. The clearest picture was sought for you. The fog around this issue is intended to be cut through. It is hoped that you can be helped. You need to know when payment for untaken days might be received. It is also important when it probably will not be.
To be clear, holidays already taken are not being discussed. This is all about leave that was earned. It is still sitting there unused. This can now be unpacked. The specific times when unused leave can become money in your pocket will be explored. Let’s start with a straightforward scenario, though perhaps not the happiest one: dismissal without misconduct.
Dismissal Without Misconduct: A Guaranteed Payout
It might be assumed that the leave is gone. This is a very common assumption. However, it is generally not right in this case. The rules here are actually quite protective. If the dismissal is not about your behavior, things like company restructuring or redundancy are considered. In such cases, a payment for every single day of leave earned but not used is legally required to be made by your employer.
Yes, it is an obligation. The calculation is made at your gross rate of pay. It can be thought of as compensation. The benefit was accrued but not used because the job ended. It is considered a key safeguard.
Using Annual Leave During Your Notice Period
This is where confusion can arise. It is sometimes thought by people that using leave to finish early means they get paid for the leave plus their notice pay. It is not like that. This is a really common misunderstanding. It is easy to see why it is thought. Let’s break it down.
If five days of your accrued annual leave are used to shorten your notice period, you leave five days earlier. Your salary will only be paid up until that new, earlier last day. The annual leave used for those five days is not paid out as an extra lump sum on top. It has effectively been used. It has been taken as time off, albeit during your notice. It has been spent. You are not paid twice for the same time.
Your normal pay is just being received for those days off. You are finishing sooner. But what about the other way around? What if a week’s holiday is requested during your notice period? But the full notice period is still intended to be worked, just with a break in the middle. That is different. If annual leave is requested and approved, and it is taken during the notice period, but the whole notice is still completed, then yes, your full salary will be paid for the entire notice period. This includes the days you were on approved leave.
Why the difference? Because in that case, payment for the leave is being made as it is taken. It is part of your normal salary during that period. It is not an extra payment at the very end for untaken leave. The leave is being utilised then and there.
The Part-Time Possibility: Agreeing to Encashment
For part-time employees, the rules can have a different setup. This situation is less common but definitely worth knowing about. There is a possibility for a part-time employee and their employer. An agreement can be made to encash earned annual leave.
So it is not automatic. It has to be a mutual agreement. If an agreement is made, then that cash value, the encashed amount, is added to the employee’s hourly gross rate of pay. Their pay is basically boosted instead of the time off being taken. But there is a catch. It needs to be official. This agreement must be clearly spelled out in the contract of service. It cannot just be assumed; it must be written down.
An exception was also mentioned in one of the sources. Some part-timers cannot do this. Yes, that was a good catch. A specific carve-out exists. This option is typically excluded for part-time employees who work at least five days a week and fall into the 30 to 34 hours per week range. This agreement is not only about leaving the company. It can happen during employment. It naturally affects any leave earned right up until departure if that agreement is in place. It just shows how that earned benefit, the leave, can be treated differently depending on the agreed terms.
Understanding “Vesting”: Why It Matters
The accounting idea of “vesting” or “vesting of accumulating paid absences” sounds technical. But the concept is pretty simple. By “vesting,” it is basically meant that the leave entitlement you have earned is yours. It is almost like money in the bank. So if your leave vests, a cash payment for any unused portion is entitled to you when you leave the company. It is confirmed as a real entitlement, not just a potential perk.
So “vesting” means payout potential. Exactly. It helps to contrast it with non-vesting leave. If leave is non-vesting, no cash payout is given when you leave. It is gone. Other types of leave can be thought about too. Maybe certain kinds of sick pay or parental leave. Often those are non-accumulating. This means they do not roll over. They are not carried forward year after year. And crucially, they are usually non-vesting too. So if they are not used within the period, they just lapse. No cash payout is made at the end.
So, it is vital that it is understood whether your annual leave vests. It is told by this whether that unused time is a concrete financial asset when you leave. That is a critical difference.
Your Annual Leave: A Financial Asset
Let’s try and pull this all together. The analogy from the sources has been used. Annual leave is thought of like a bank account of hours you have earned. That is a helpful way to think about it. So let’s recap the main points based on that.
- First, if hours are left in that leave bank when your job ends, especially if you are dismissed for reasons other than misconduct, those hours must be cashed out for you by the company. It is like the account is closed and the balance is given. That is the mandatory payout.
- Second, in some specific situations, as was discussed with certain part-time roles, an agreement might be had to regularly cash out some earned hours instead of them being banked for time off. That is agreed up front. The contract thing again. The contract should always be checked.
- Third, and this is where confusion often lies, if those hours have already been spent, either by actual holidays being taken or by them being used to cut short your notice period, well then those hours are gone from the bank. They have been utilised. So an additional cash payment will not be received for them at the end because they were not unused when you left.
The bank analogy holds up pretty well. It is about what is genuinely left in the account, unused at the point you walk out the door. We have definitely gone deep here. The different rules and specific cases have been unpacked. It really seems the absolute key is whether that leave was earned, genuinely unutilised, and still sitting there as an accrued benefit right at the moment your employment ends.
If you like to submit a question, or would like us to touch on certain topics, you may email us at [email protected]. When in doubt, seek legal advice or consult an experienced licensed Employment Agency with the Ministry of Manpower.
Yours Sincerely,
The editorial team at Singapore Employment Agency
Little Big Employment Agency Pte. Ltd. is a licensed Employment Agency with the Ministry of Manpower with license number 19C9790.