Our business is covered by three different modern awards and we have heard about some recent changes regarding annual leave. What has changed?
In a major case which continued for over two years, Ai Group has been successful in convincing a Full Bench of the Fair Work Commission (FWC) to grant some important new rights for employers and important flexibilities for employers and employees.
As a consequence, the annual leave terms in most modern awards have been varied.
The award variations deal with:
1. The cashing out of a particular amount of annual leave by agreement between an employer and an employee;
2. Employer and employee rights regarding excessive leave accruals;
3. Payment for annual leave through electronic funds transfer (EFT) in accordance with the usual pay cycle;
4. The taking of annual leave in advance by agreement between the employer and the employee.
Not all of the awards that have been subject to variations contain the above changes. It is important to note that certain conditions, limitations and procedural requirements apply, as summarised below.
Not all awards have been subject to the above variations. A list of the awards that have been varied, and what those variations are, can be found on the Fair Work Commission’s website.
The specific terms of each modern award should be referred to so that businesses are fully across the changes.
Excessive leave
Employers have been given enhanced rights to direct employees to whom an applicable award applies to take annual leave when an employee has an “excessive leave accrual”.
The model clause contains a number of relatively complex provisions:
1. An employee is defined as having an excessive leave accrual if the employee has accrued more than 8 weeks’ paid annual leave (or 10 weeks’ paid annual leave for certain shift workers).
2. If an employee has an excessive leave accrual, the employer or the employee may seek to confer with the other and genuinely try to reach agreement on how to reduce or eliminate the excessive leave accrual.
3. If an employer has genuinely tried to reach agreement with an employee but agreement is not reached, the employer may direct the employee in writing to take one or more periods of paid annual leave, provided that:
4. If an employee has genuinely tried to reach agreement with an employer (as referred to above), the employee may give a written notice to the employer requesting to take one or more periods of paid annual leave, provided that:
Employees to whom an applicable award applies will be able to cash out accrued annual leave in excess of four weeks’ accrued leave, by agreement with their employer and subject to various safeguards, including:
The FWC’s decision relates only to employees to whom an applicable award applies. Cashing out of annual leave for employees covered by an enterprise agreement under the Fair Work Act is available only if the agreement provides for such cashing-out and the safeguards in section 93 of the Act apply.
Award-free and agreement-free employees are able to cash out annual leave in excess of four weeks’ accrued leave, by agreement with their employer and subject to the conditions in section 94 of the Fair Work Act.
A new clause has been inserted enabling an employer and employee to agree in writing to the employee taking a period of annual leave in advance of the leave accruing. The agreement in writing must:
The employer must keep a copy of any agreement as an employee record.
If, on the termination of the employee’s employment, the employee has not accrued an entitlement to all of a period of paid annual leave already taken in accordance with an agreement reached under the relevant clause, the employer may deduct the relevant amount from any money due to the employee on termination.
Despite the fact that it is very common for employees to be paid for their annual leave in accordance with the normal pay cycle, some awards still require that annual leave be paid in advance of the commencement of annual leave.
A new clause proposed by Ai Group has been inserted into the applicable awardsenabling an employer to pay an employee paid by electronic funds transfer (EFT) to be paid in accordance with their usual pay cycle while on paid annual leave.
The variations relating to the cashing out of annual leave, giving employer's rights to direct an employee withexcessive annual leave to take annual leave and the payment of annual leave via EFT come into operation from the first full pay period that starts on or after 29 July 2016.
However, the clause that gives an employee a limited right to give notice to an employer of the taking of excessive leave operates from the first full pay period that starts on or after 29 July 2017.
Please call the Workplace Advice Line on 1300 55 66 77 for further information about the above variations or annual leaveunder any award or industrial instrument.
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.