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Important changes to awards on annual leave

Modern AwardsJune 1, 2016

Important changes to awards on annual leave (Last Updated On: August 9, 2016)

The Fair Work Commission (Commission) has handed down a decision confirming that a number of awards will be amended to provide more flexibility in relation to annual leave, by allowing:

  • 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.

Further details on the amendments and which awards will be affected are set out below.

What should I do?

The amendments to the awards are not yet in force. Therefore, you do not need to take any action yet and we will let you know once these changes come into effect.

Once the changes have come into force, please call us on 1300 651 415 if you want to implement any of these changes in your business. We will be able to prepare the required agreements for you and provide you with further advice.

Please note that you will not be under an obligation to allow your employees to cash out annual leave or grant leave in advance if you do not wish to do so.

As always, we are on hand to help you in relation to any enquiries you have about the modern awards which apply to your business and employees.

Keep a look out for further updates.

 

What will change?

 

1. Cashing out of annual leave

 115 awards will be amended to allow an employer to agree that an employee can cash out their accrued annual leave, subject to a number of safeguards.

  • 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 agreement relating to the cashing out.

Employers do not have to agree to cash out annual leave, but they cannot force or pressure an employee to do so.

 2. Granting leave in advance

Annual leave accrues on a daily basis. Requests to take leave before it has been accrued are commonplace, but only 76 awards currently allow employers to agree that employees can take leave in advance.

116 awards will be amended so employers can agree to allow employees to take leave in advance of accrual and to 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.

3. Excessive annual leave

 Employees with excessive annual leave can create a significant liability for the business and not taking leave can pose a significant risk to an employee’s wellbeing and productivity at work.

83 awards will be amended to will 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.

Employees will also be able to give a notice requesting leave, but this right will not commence until 12 months after the amendments come into effect (to allow businesses with a high level of excessive leave to reduce this over time).

 4. EFT payments and paid annual leave

 Some awards provide for employers to pay employees annual leave prior to taking the leave. 51 awards will be amended so that employers who pay by EFT (Electronic Funds Transfer) 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 will be amended?

Click here to view a list of the awards affected by the amendments. A further hearing on 1 June 2016 will deal with the remaining awards.

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