Modern Award Review - Changes to Annual Leave

25th May 2016

Almost tweleve months after the original decision, the Fair Work Commission has now decided on the ‘plain English’ draft of modern award Annual leave provisions allowing cashing out of annual leave, EFT payment of annual leave, leave in advance and the right to direct employees to take excessive leave accruals. The Commission has taken its usual cautionary approach and ultimately decided to allow only limited flexibility to businesses but with additional record keeping requirements. There are of course, exceptions to the rule for some awards, which are yet to be decided.

Cashing out annual leave

115 modern awards will be varied to allow individual employers and employees to agree to cash out a maximum of 2 weeks accrued annual leave every year, as long as the employee retains at least 4 weeks annual leave. The agreement must be in writing signed by each party (including parents or guardians where the employee is younger than 18 years of age) on each ocassion and retained as an employment record. The employee must be paid no less than the amount he or she would have received if they had taken the leave. Therefore, it would include all purpose allowances, annual leave loading or shift penalties where the award provides for the payment.

Excessive annual leave accruals

Employers must first attempt to reach agreement with the employee to schedule leave before they may direct them to take the excessive accrued annual leave. Employers cannot direct an employee to take less than one week or an amount of leave that would result in them retaining less than 6 weeks accrued annual leave (including arrangements to cash out leave). The notice to take leave cannot be less than 8 weeks or more than 12 months. An employee will have an excessive leave accrual if the employee has accrued more than 8 weeks’ paid annual leave (or 10 weeks’ paid annual leave for a shiftworker).

Employees will also have a right to request and be granted approval to take excessive amounts of accrued annual leave. If an employee has genuinely tried to reach agreement with an employer but agreement is not reached (including because the employer refuses to confer), the employee may give a written notice to the employer requesting to take one or more periods of paid annual leave. The restrictions on the amount of leave requested are similar to those imposed on the employer but are capped at 4 weeks per year.

Further advice

Employers should update their employment policies and procedures to ensure they reflect the arrangements provided in each applicable award. The best way of ensuring you have access to the latest information and advice to stay compliant is to subscribe to Employee Relations Online. Members can access awards, wage sheets, model employment policies, procedures, employment contracts and other tools, guides and resources. If you prefer, we can also provide customised advice and HR policies and templates for your business. Contact us for a quote.

A summary of the decision and how each modern award is affected is available to view on the Fair Work Commission website.