Annual Leave Changes in Modern Awards

The Fair Work Commission (“FWC”) has amended the annual leave provisions in the majority of the Modern Awards. The changes fall into the four following categories:

Cashing out annual leave

Employees under certain Awards can now cash out less than two weeks of annual leave each year if they have a signed written agreement with their employer and will have at least four weeks annual leave left after the cash out.

Annual leave in advance

Some Awards now allow an employer and employee to agree that an employee can take paid annual leave before he/she accrues it.  That agreement needs to be in writing and signed by both the employer and the employee and state the amount and timing of leave to be taken in advance.

Excessive annual leave balances

“Excessive leave accrual” is when an employee has accrued more than eight weeks of paid annual leave (or ten weeks for a shift worker).  If an employee has an excessive leave accrual and is unable to agree with his/her employer on when to take annual leave then:

  1. the employer can direct the employee to take one or more periods of annual leave; or,
  2. the employee can request one or more periods of paid annual leave and the employer must grant this request (this provision applies from 29 July 2017).

Each notice must be in writing and meet certain requirements including giving the other party between eight weeks’ and 12 months’ notice of when the leave will begin.

Payment for annual leave

Previously under many of the Modern Awards an employer had to pay an employee’s annual leave entitlements immediately before the commencement of the employee’s annual leave meaning the employer had to make arrangements for calculating and paying the annual leave outside of the normal payroll cycle.  The FWC has amended 51 Awards by allowing employers who pay employees by EFT to pay employees’ annual leave in accordance with their usual pay cycle.  This only applies to employees paid by EFT and does not extend to employees paid by cash or cheque.

The FWC has amended 114 of the 122 Modern Awards and most of the changes apply from 29 July 2016 but only some of the above changes apply to some awards.  We would be happy to help if you are unsure which award covers your employees or the effect of the above on your business.

Emma Mancini

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