Got your eye on a giant new flat screen TV, the latest mobile phone or that must-have pair of designer leather boots, but can’t figure out how to pay for them? Then the recent changes introduced by Fair Work regarding how annual leave accruals are handled might be just the thing you’re looking for.
Effective 29 July 2016, significant expansions to the terms and conditions relating to annual leave have come into effect under the majority of Modern Awards. Most notably the changes will allow a much larger percentage of Australian workers the opportunity to ‘cash out’ part of their annual leave, provided they meet certain criteria.
The amendment will allow employees to cash out up to 2 weeks of annual leave per 12 months. However, in order to do so, there must be a balance of at least four weeks leave remaining after the hours have been cashed out.
Cashing out leave involves an employee making an agreement with their employer to take payment for a set number of leave hours, without actually taking the time off work. This then allows them to receive a lump sum payment in addition to their regular earnings. As an employee can only cash out leave if their award or agreement allows it, these changes have given the choice to a much greater percentage of the workforce.
Another change that has been addressed in most awards is the option for an employer and employee to reach an agreement regarding payment of annual leave in advance of its accrual. Included in the ruling is how the employer can handle recovering the funds, should the employee leave before all of the hours have been accrued back.
In conjunction with this, some awards had previously stated that it was compulsory for employees to receive payment in full at the beginning of their leave period. These awards have now all had a clause added offering the option for payment to be paid in their regular pay cycle, as long as payment is made by EFT.
Employees with excessively large annual leave balances were also addressed. Clauses have been added to many awards defining what is ‘excessive’ and on what grounds an employee can be directed to take leave, including how much leave is to be taken and how much balance must remain.
To find out whether these changes affect the awards covering your workplace, more information is available on the Fair Work Ombudsman website. You can either read their general information guidelines relating to annual leave or refer directly to the award and read in detail exactly how it will affect you.
By: Barbara Nunn Payroll Subject Matter Expert