If an employee has annual leave owing, and is about to receive a pay increase, can the employer advise them that the current leave owing will be paid at their old rate of pay (as these hours were accrued at the old rate of pay)?
The National Employment Standards (as part of the Fair Work Act 2009) governs annual leave entitlements for all national system employers.
As per s 90(1) of the Fair Work Act 2009 (see below), payment for annual leave must be made at the base rate of pay that applies at the time that the leave is taken. This also applies for annual leave that is to be paid out when an employee ceases to work for the employer:
"SECT 90 Payment for annual leave
(1) If, in accordance with this Division, an employee takes a period of paid annual leave, the employer must pay the employee at the employee's base rate of pay for the employee's ordinary hours of work in the period.
(2) If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave."
Therefore, an employee is not able to be paid for annual leave at a retrospective rate of pay despite accruing leave whilst receiving that pay.
Clinton is the Publications Manager at Ai Group. He is responsible for a number of key services including Annotated Modern Awards, Workplace Relations Handbooks and the management of Ai Group’s HR and Health & Safety Resource Centres. Clinton has a Masters in Employment Relations and previously held advisory roles with the Workplace Authority and Fair Work Ombudsman.
