Changes to Annual Leave provisions in Modern Awards

 

As part of the four-yearly review of Modern Awards, the Fair Work Commission has varied the Annual Leave provisions of most Awards.  The changes made in respect of Annual Leave fall into four categories:

  1. Cashing out annual leave
  2. Granting leave in advance of accrual
  3. Payment during a period of annual leave, and
  4. Dealing with excessive balances of annual leave.

Further information on each topic follows-

Cashing out annual leave

Most modern awards now allow employees to cash out annual leave using a written agreement.  The agreement must:

  • State the amount of leave to be cashed out and the payment to be made to the employee;
  • State the date that the payment is to be made to the employee; and
  • Be signed by the employer and employee and, if the employee is under 18 years of age, by their parent or guardian.

The clause also provides that:

  • The payment must not be less than the amount that would have been payable had the employee taken the leave;
  • The employee’s annual leave balance must not be less than 4 weeks after the cash out;
  • The maximum amount of annual leave that may be cashed out in any 12-month period is 2 weeks; and
  • The employer must keep a copy of the agreement as an employee record.

Leave in advance

Most awards now allow employees to take annual leave in advance of the entitlement accruing if their employer agrees in writing.  The agreement must:

  • State the amount of annual leave to be taken in advance and the date on which the leave is to commence; and
  • Be signed by the employer and employee and, if the employee is under 18 years of age, by their parent or guardian.

The clause also provides that:

  • The employer must keep a copy of the agreement as an employee record; and
  • If, on the termination of the employee’s employment, the employee has not accrued an entitlement to the period of annual leave taken in accordance with the agreement, the employer may deduct an amount equal to the amount that was paid to the employee from the employee’s termination pay.

Payment for annual leave in usual pay cycle

Some modern awards required an employer to pay for annual leave prior to the employee taking the leave.  These modern awards have been varied to insert a term enabling employees who are paid by electronic funds transfer to be paid in accordance with their usual pay cycle while on annual leave.

Excessive annual leave

Most modern awards now enable employers to direct employees with excessive annual leave balances to take leave if:

  • An employee has accrued more than 8 weeks’ paid annual leave (or 10 weeks’ annual leave for a shiftworker); and
  • An employer has genuinely tried to reach agreement on how to reduce or eliminate the excessive accrual but agreement is not reached.

A direction:

  • Is of no effect if the employee would have less than 6 weeks’ accrued leave remaining after the direction;
  • Must not require the employee to take less than one week of leave;
  • Must provide at least 8 weeks’ notice to the employee (but not more than 12 months’ notice) before the mandatory leave period is to begin; and
  • Must not be inconsistent with any leave arrangement agreed by the employer and the employee.

A clause will also come into operation from the first full pay period on or after 29 July 2017 which enables employees to make a written request to take leave which the employer must grant in circumstances where:

  • The employee has genuinely tried to reach agreement with an employer but agreement is not reached;
  • The employee has had an excessive leave accrual for more than six months at the time of giving notice;
  • The employee has not been given a direction by the employee to take leave that would eliminate the employee’s excessive leave accrual;
  • If granted, the employee’s remaining leave balance will be at least 6 weeks;
  • The period of leave is for at least one week;
  • The leave period requested is no less than 8 weeks or more than 12 months after the notice is given; and
  • The employee has not requested more than 4 weeks’ paid annual leave by this mechanism (or 5 weeks’ paid annual leave for a shiftworker) in any period of 12 months.

If members have any queries about annual leave, please contact the Workplace Relations Hotline on 1300 277 881.

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