Important Changes To Annual Leave Provisions
For many employers, managing Annual Leave entitlements is an onerous task. This is especially true for businesses with a large number of employees who have accrued more than four weeks of annual leave, resulting in a strain on the current ratio of leave. Accrued annual leave entitlements is an expense to the business which needs to be paid out at the pay rates applicable in the period when the leave is taken or paid out in the case of termination.
As part of the four-yearly review of Modern Awards, the Fair Work Commission has made changes to Annual Leave rules which enables employers to manage annual leave entitlements more efficiently and enables employees in certain circumstances to convert large unused annual leave entitlements into cash.
The four major changes to annual leave provisions are outlined below.
Under most awards the employee can now cash out excess annual leave above the mandatory four-week reserve. The cash out will be made at the current pay rate and will include all other benefits like superannuation, annual leave loading (if applicable) etc. The employer cannot force the employee to cash out their leave and the employer needs to maintain appropriate documentation.
The revised awards now let’s employees take annual leave in advance before they have accrued it and allows the employers to pay leave in advance, however the arrangement needs to be agreed in writing and signed.
Under the revised Annual Leave provisions, an employer can now force an employee who has accrued excessive annual leave to take leave. This provision is only applicable when the employee has more than eight weeks of leave or 10 weeks in the case of shift worker. The employer can only force them to take accrued leave in excess of 6 weeks and has to give a notice period of 2-12 months of notice period.
Before the advent of electronic payments, employers were required to pay the leave in advance before the employee went on leave so that they could deposit the cheque and use the money, however with electronic payments, the employers can pay the leave during the standard pay cycle.
To take full advantage of the changes made by the Fair Work Commission to Modern Awards, we recommend that existing leave policies are reviewed to incorporate the changes that are beneficial to both employers and employees.
Should you have any questions in relation to the changes please contact us or speak to your ESV engagement partner on 02 9283 1666.
Article by Hemant Nisar