What is the difference between casual and annual leave?
Casual and annual leave are separate types with separate annual quotas and different intent. Annual leave covers planned time away, booked in advance. Casual leave covers the short, unplanned day that is not illness. Keeping them apart is what stops one absorbing the other.
The split exists because the two answer different needs, and a single pooled allowance serves neither well.
Annual leave is planned. It gets booked months ahead, cover is arranged around it, and everybody expects it. Casual leave is the opposite shape: a day that arrives without notice and cannot be planned for.
Pooling them means the planned allowance gets eaten by unplanned days, or people hoard against uncertainty and take no proper break. Both outcomes are worse than two quotas.
The split is also strongly regional. The casual category is standard in some places and unheard of in others, so the naming is a setting rather than a fixture.
Several other types usually sit beside these two. A sickness or emergency allowance. An unpaid one with a zero quota. Types for marriage and for a new child. Home working, where a company runs it as an allowance.
Each carries its own quota and its own two flags. So one type being paid tells you nothing about the next, and the same goes for whether unused days can be exchanged.
Read your own list rather than a general description. Another company's split is not yours, and the wording rarely travels.
Pooling them is the mistake to avoid. One allowance for everything means the planned break gets eaten by the days nobody planned, or people hoard against uncertainty and take no proper break at all.
Both outcomes are worse than two quotas that each run out on their own. That is the whole case for the split.
Merging two types later has a cost as well. Past requests were filed against the type as it stood, so the history stops reading cleanly.
The paid flag and the encashable flag sit on each type independently. Two types can behave differently on both, so read the configuration rather than assuming the categories imply it.
Read your own type list rather than a general description. Leave types, their quotas and their flags are configured per company, so another company's split is not yours.
Related questions
How many leave types can exist?
Types are configurable, and companies commonly run several beyond these two. Each carries its own annual quota and its own paid and encashable flags.
Is casual leave paid?
The paid flag sits on the type, so the answer is recorded rather than universal. Read the flag on your own configuration.
Can two types be merged?
A company can configure whatever set it wants. Merging changes historical readability, since past requests were filed against the type as it stood.