Leave Payout on Termination: How to Calculate Final Leave Payments (AU, UK, US)

When an employee leaves, their accrued annual leave must be paid out — but the amount, the rate, and the rules vary significantly between Australia, the UK, and the US. In Australia, all accrued annual leave is paid at the base rate of pay. In the UK, statutory holiday pay is calculated using the 52-week average. In the US, there is no federal requirement, and the rules depend entirely on state law.

This article provides the formulas, worked examples, and comparison tables for all three jurisdictions.

Key Takeaways

• Australia: All accrued annual leave is paid out at the employee’s base rate of pay on termination — Fair Work Act 2009 s.90.
• UK: Statutory holiday pay is paid at the employee’s average weekly pay over the previous 52 weeks.
• US: No federal requirement to pay out accrued PTO — it depends on state law and company policy.
• Long service leave in Australia and contractual holiday in the UK may have different rules from statutory entitlement.

Australia: All Accrued Annual Leave Is Paid Out

Under Section 90 of the Fair Work Act 2009, when an employee’s employment ends, the employer must pay the employee for all accrued but untaken annual leave. This applies regardless of whether the termination is by resignation, redundancy, dismissal, or expiry of a fixed-term contract.

The Formula

Annual leave payout = Accrued days × (Annual salary ÷ 260)

Where 260 is the number of working days in a year (52 weeks × 5 days).

Alternatively, for hourly employees:

Annual leave payout = Accrued hours × Hourly rate

Worked Example

Priya earned $85,000 per year and had 15 days of accrued annual leave when her employment was terminated.

• Daily rate: $85,000 ÷ 260 = $326.92
• Payout: 15 × $326.92 = $4,903.85

If Priya also had 7.2 days of accrued long service leave (under Victorian legislation), that is paid at a different rate — typically 76% of the ordinary weekly rate for long service leave, depending on the state.

What Is Included

• All accrued annual leave from the current leave year
• All carried-over leave from previous years
• Leave loading (in some states and under some awards, leave loading is also payable on termination — check the specific award or enterprise agreement)

What Is Not Included

• Personal/carer’s leave that has not been taken (this does not accrue a payout on termination)
• Compassionate leave
• Family and domestic violence leave

UK: Statutory Holiday Pay on Termination

In the UK, when an employee leaves, they are entitled to be paid for any statutory holiday they have accrued but not taken. The calculation uses the 52-week average.

The Formula

Holiday pay = Average weekly pay × Weeks of untaken leave

Where average weekly pay is calculated as:

Total pay in the last 52 paid weeks ÷ Number of paid weeks

(If fewer than 52 paid weeks exist, look back up to 104 weeks.)

Worked Example

James earned £38,000 per year and had 7 days of untaken statutory holiday when he left.

• Average weekly pay: £38,000 ÷ 52 = £730.77
• Holiday pay: 7 days × (£730.77 ÷ 5) = £1,023.08

If James had a contractual entitlement above the statutory 28 days, the excess is paid at the contractual rate — which may differ from the statutory average.

Rolled-Up Holiday Pay

For irregular-hours and part-year workers (leave years from 1 April 2024), if the employer uses rolled-up holiday pay, the 12.07% has already been added to each payslip. On termination, there is no additional holiday pay to calculate — the employee has already received it.

Notice Period Holiday

If the employee is on notice and has untaken holiday, the employer can require them to take it during the notice period — effectively paying them for leave they are required to take. This is lawful under the Working Time Regulations 1998, provided the employer gives notice of at least twice the length of the leave period.

US: State Law Determines the Obligation

The US has no federal requirement to pay out accrued PTO on termination. The obligation — if any — depends on state law.

States That Require Payout

State	Requirement
California	All accrued vacation must be paid out; no cap
Colorado	All accrued vacation must be paid out
Illinois	All accrued vacation must be paid out (if employer policy or contract)
Massachusetts	All accrued vacation must be paid out
Montana	All accrued vacation must be paid out
Nebraska	All accrued vacation must be paid out
Rhode Island	All accrued vacation must be paid out

States That Do Not Require Payout

State	Position
Texas	No requirement; follows company policy
Florida	No requirement; follows company policy
Georgia	No requirement; follows company policy
New York	No requirement; follows company policy (but some local laws may differ)

States With Specific Rules

Some states have nuanced positions. For example, Washington requires payout of accrued vacation but not of “PTO” that is categorised as a general leave bank. Connecticut requires payout unless the employer’s written policy states otherwise. Pennsylvania follows company policy unless the policy says otherwise.

The key question in every US case: check the employer’s written policy and the state’s statute. If the state requires payout and the policy is silent, the employee gets paid. If the state does not require it and the policy is silent, the employee gets nothing.

Comparison Table: AU, UK, US

	Australia	UK	US
Legal requirement to pay out?	Yes — statutory	Yes — statutory	Depends on state
Amount	All accrued annual leave	Statutory + contractual	Per state law and policy
Pay rate	Base rate of pay	52-week average	Per state law
Leave loading?	Check award/agreement	No (contractual only)	No
Long service leave?	Yes, per state rules	No equivalent	No equivalent
Rolled-up holiday pay?	N/A	No additional payout	N/A

Common Mistakes

• Australia: Not paying leave loading on termination when the award requires it.
• UK: Using the wrong averaging period — the 52-week rule replaced the 12-week rule in April 2020.
• US: Assuming there is no obligation without checking state law. California alone has cost employers millions in penalties for failing to pay accrued vacation.
• All jurisdictions: Not updating the payroll system promptly on termination. Delays in paying out leave can trigger additional penalties in some states.

How Leave Balance Helps

Leave Balance calculates the final leave payout on termination automatically, applying the correct formula and pay rate per jurisdiction. For multi-country employers, the system applies Australia’s base-rate rule, the UK’s 52-week average, and US state-specific requirements — reducing the risk of underpayment and the penalties that follow.