If an employee is taking annual leave, are we required to pay all their annual leave for that period at the start of the leave or can it be paid as part of the normal pay cycle while the employee is on leave?
There are 51 modern awards containing clauses requiring an employer to pay an employee for annual leave before the leave commences. For example, clause 34.4(a) of the Food, Beverage and Tobacco Manufacturing Award 2010 states:
“34.4 Payment for period of annual leave
a)Instead of the base rate of pay as referred to in s.90(1) of the Act, an employee under this award, before going on annual leave, must be paid the wages they would have received in respect of the ordinary hours the employee would have worked had the employee not been on leave during the relevant period.”
In 2016, as part of the 4-yearly review of modern awards, the Fair Work Commission (FWC) added the following clause to the 51 modern awards:
“Electronic funds transfer (EFT) payment of annual leave
Despite anything else in this clause, an employee paid by electronic funds transfer (EFT) may be paid in accordance with their usual pay cycle while on paid annual leave.”
The effect of this clause is that when employees are paid by EFT, while on leave they may be paid in accordance with their usual pay cycle, rather than being paid before the leave starts.
If the employee is paid by cash or cheque, there is no change to the requirement under the 51 awards to pay the employee before annual leave commences.
To confirm whether the Award that applies to your employees contains the above provision to pay annual leave by EFTvia the usual pay cycle, or any other relevant provisions, call the Ai Group Workplace Advice Line on 1300556677.
If the business has an enterprise agreement in place, the employer will need to refer to it to determine whether an employee may be paid annual leave in accordance with their usual pay cycle or needs to be paid upfront.
The Fair Work Act 2009 (the Act) does not specifically deal with the timeframe for the payment of annual leave periods. However, section 323 of the Act provides that an employer must pay an employee amounts payable in relation to the performance of work. Amounts will include leave payments if they become payable during a relevant period.This means that if an employee takes a period of annual leave, the payment for annual leave should be included in that employee’s pay for the relevant payment cycle.
For further information on this topic, or for more detailed information regarding EFT payments for annual leave under a specific modern award, please call the Ai Group Workplace Advice Line on 1300 55 66 77.
