Cashing out annual leave, excessive annual leave and annual leave in advance.
The Fair Work Commission (FWC) has reviewed annual leave in modern awards and there have been changes to the annual leave provisions to the transport industry modern awards to1 :
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- allow award-covered employees to cash out annual leave
- direct award-covered employees to take excessive annual leave
- grant award-covered employees annual leave in advance of it being accrued.
1. Cashing Out Annual Leave
Each cashing out must be in a separate written agreement (signed by the employee and employer) and state the amount of leave to be cashed out, the amount of the payment and the date it will be made on.
An employee must not have less than 4 weeks accrued annual leave after cashing out annual leave and cannot cash out more than 2 weeks of annual leave in any 12 month period.
2. Excessive Annual Leave
Employees are deemed to have excessive annual leave if they have accrued more than 8 weeks’ paid annual leave.2 If an agreement cannot be reached between the employer and employee to use the annual leave, the employer can direct the employee to take one or more periods of paid annual leave.
The direction to take annual leave must not result in the employee having less than 6 weeks of accrued annual leave, must give the employee a minimum of 8 weeks’ notice to take the leave and must not require the employee to take a period of leave of less than 1 week long.
3. Annual Leave in Advance
Employees and employers can agree in writing to have their modern award-covered employees take annual leave before they have accrued the entitlement to it. If employment ends before the employee has accrued all the annual leave they have already taken, the amount of money equal to the value of the leave already taken can be deducted from the employee’s termination payment.
What should employers do?
- Consider adopting the changes to the modern awards in HR policies and review your annual leave policy and approach to leave management generally
- Review employment contracts for award employees to ensure there is adequate flexibility in the contracts to incorporate the changes in the modern awards
- Ensure that the changes to modern awards are considered when negotiating any new enterprise agreement, including whether you wish to retain more flexible arrangements under agreements.
If you would like specific advice on the impact of these changes or assistance with reviewing or updating your policies and contracts, please contact a member of our Workplace Relations team.
1 Includes the Road Transport and Distribution Award 2010 and the Road Transport (Long Distance Operations) Award 2010.
2 10 weeks if the employee is a continuous shiftworker.
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