Every four years the full bench of the Fair Work Commission (FWC) is required to review modern awards. Modern awards are the instrument that provides for minimum rates of pay and conditions of employment for many workers.
In the recent review, the FWC has decided to vary the provisions around annual leave in most modern awards to address the following topics:
- Cashing out annual leave;
- Excessive annual leave accruals;
- Granting annual leave in advance; and
- Payment of annual leave during leave.
Cashing out annual leave
Employees who are covered by modern awards are only able to “cash out” their annual leave if the relevant award allows it. The FWC has varied most modern awards (the only ones that were not varied were those relating to the maritime industry and the “Security Services Industry Award 2010”) to provide a term that allows employees to cash out some of their annual leave under certain conditions including:
- A maximum of two weeks of annual leave can be cashed out every 12 months;
- The employer and employee must specifically agree in writing to cash out the leave; and
- After cashing out the leave the employee must have a balance of at least four weeks annual leave remaining.
Excessive annual leave accruals
A large number of modern awards will be varied to include a provision that deals with excessive annual leave accruals. This provision provides that an employee has an excessive annual leave accrual if they have accrued more than eight weeks of annual leave (or ten weeks for a shift worker).
"...subject to certain conditions, the employer will have the right to direct employees to take annual leave..."
In those circumstances, subject to certain conditions, the employer will have the right to direct employees to take annual leave and employees will have the right to demand the employer to grant a period of annual leave.
Granting annual leave in advance
The FWC will vary modern awards to include a term that allows an employer and employee to agree in writing for the employee to take paid annual leave in advance. If the employee subsequently leaves the employment and has not yet accrued sufficient annual leave to make up the deficit, the employer is entitled to make a deduction from the employee’s final pay.
Payment of annual leave during leave
At the moment a large number of modern awards require an employer to pay an employee for annual leave in advance/at the commencement of the leave period. These awards are now to be varied to allow the employer to pay the employee their annual leave entitlements while they are on leave in accordance with the usual pay cycles, if they are paid electronically.
It has not yet been determined when these provisions will come into effect. Andersons Solicitors will keep you updated in this regard.
As detailed above, these amendments do not affect all modern awards. Before relying upon any of the above amendments, you should check to see if the modern award which covers your employment is one of those affected. If you have any queries regarding annual leave or any other conditions of employment, please do not hesitate to contact Andersons Solicitors Special Counsel in Employment Law, Margaret Kaukas.