What is the rate of pay for leave entitlements when an employee moves from a higher paying job to a lower paying job (or vice versa)?
The answer to this question will vary depending on the exact circumstances surrounding the change of job and the industrial instruments that apply.
Some common scenarios are discussed below.
When an employee moves from a permanent position into casual employment, they would generally be regarded as terminated under the Fair Work Act. In these circumstances, the employee’s leave entitlements should be paid out on termination as per the rate of pay of their permanent role.
The Fair Work Act requires that an employee’s annual leave and personal/carer’s leave be paid at the rate of pay applicable to the ordinary hours of work in the period that the leave is taken.
This means that an employee who has moved to a lower paying job would be paid their annual leave and personal/carer’s leave at the lower rate of pay once this rate applies to the ordinary hours in which the leave is taken.
Likewise, if an employee has moved to a higher rate of pay then annual leave and personal/carer’s leave would be paid at the higher rate of pay once this rate applies to the ordinary hours in which the leave is taken.
If an employee is going to move to a lower pay job and the employer intends to process their leave entitlements at the lower rate of pay, then the employer should make this clear to the employee before the change. To do so clarifies obligations and reduces confusion.
Some employers choose to ‘crystallise’ entitlements for employees moving to a lower paying job. This means that they agree, in a manner which may be binding, to pay any leave accrued up until the change at the former, higher rate of pay. Such agreement can have various benefits from an employee relations perspective. Employers who reach such agreement should record it in writing.
There are other types of leave, such as long service leave, which may have different payment obligations. This will depend on the terms of the legislation or other industrial instrument which governs this leave.
For more information about different sorts of leave, different employment situations or the application of industrial instruments specific to your business, please call the Ai Group Workplace Advice Line on 1300 55 66 77.
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.
