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Green light given to Modern Award annual leave provisions.

Modern AwardsAugust 1, 2016

Green light given to Modern Award annual leave provisions. (Last Updated On: August 8, 2016)

As we explained in our previous updates, the Fair Work Commission (FWC) has decided to amend a significant number of Awards to allow greater flexibility for employers and employees around annual leave.

The changes take effect from the first full pay period after 29 July 2016 and allow:

• employees to cash out annual leave, rather than take the leave
• employers to grant annual leave in advance
• employers to require employees to take leave if they have accrued excessive leave entitlements

We have provided a summary of the changes below.

What do I need to do?

You do not need to do anything. No changes will be required to your contracts, policies or handbooks drafted by Employsure.

You are also not under an obligation to allow your employees to cash out annual leave or to grant leave in advance. However, if you would like to agree to allow an employee to do so, or require an employee to take excessive leave they have accrued, then there are some requirements you need to comply with (eg getting a signed agreement). You can call our Advice line for more information on these requirements and we can draft the agreements for you.

So what has changed?

Cashing out annual leave.

112 Modern Awards now enable an employer and employee to agree to the employee cashing out their accrued annual leave, if the following requirements are met.

• Employees can cash out a maximum of two weeks of annual leave a year, but must be left with at least four weeks of accrued annual leave
• Employees must be paid the full amount they would have received if they had actually taken the leave
• There must be a signed written agreement relating to the cashing out
• Employers do not have to agree to cash out annual leave, but they also cannot force or pressure an employee to do so

Taking annual leave in advance.

113 Modern Awards now enable an employer and employee to agree to allow the employee to take leave in advance of accrual and, importantly, confirm that the employer can deduct monies for any leave taken but not accrued from final pay on termination.

Again the agreement needs to be in writing and signed by the employer and employee. The agreement must state the amount of leave to be taken in advance and the date that the leave will start.

Excessive leave accrual – directing an employee to take annual leave.

90 Modern Awards now allow employers to direct employees with excessive annual leave (eight weeks for normal employees and 10 weeks for shiftworkers) to take leave.

Initially the employer and employee must try to reach an agreement on how to reduce the leave entitlement. If an agreement cannot be reached, the employer will be able to give written notice directing the employee to take leave, subject to a number of safeguards.

• The employee cannot be left with less than six weeks annual leave or be directed to take less than one week of leave at a time

• The leave must be taken no sooner than eight weeks and no later than 12 months after the notice

• The notice cannot be inconsistent with any other leave arrangement already agreed

EFT payments and paid annual leave.

Some Awards provide for employers to pay employees annual leave prior to taking the leave. These Awards will be amended so that employers who pay by Electronic Funds Transfer (EFT) can pay leave in accordance with their usual pay cycle. Employees paid by cash or cheque will still be required to be paid in advance.

Which awards are affected?

The changes affect most Awards that did not previously provide for this flexibility in relation to annual leave. Please click here for a table prepared by the FWC to see which of the changes affect the Awards applicable to your business and employees.

The FWC is still in the process of negotiating the annual leave changes to some Awards. The Awards that are not yet impacted are:

• Dredging Industry Award 2010
• Educational Services (Teachers) Award 2010
• Higher Education Industry—Academic Staff—Award 2010
• Higher Education Industry—General Staff—Award 2010
• Marine Towage Award 2010
• Maritime Offshore Oil and Gas Award 2010
• Ports, Harbours and Enclosed Water Vessels Award 2010
• Seagoing Industry Award 2010

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