Do you have employees with excessive accrued annual leave?

New changes now in place

Employees who have accumulated large chunks of annual leave have been an ongoing dilemma for   many small to medium enterprise (SME) employers. However, a recently completed Fair Work Commission review has resulted in some significant changes to the rules for 112 of the current 122 modern awards, making it easier to deal with this issue. Hailed as a godsend by many employers, the changes also allow for more flexibility for almost two million Australian workers.

So how do some employees build up so much leave in the first place? Often it's a case of a business not being able to do without a key staff member for long periods of time, so the breaks they take are short and infrequent. It may also be part of a strategy to build up leave prior to retirement or to allow for unforeseen emergencies such as health or family issues. Then again, an employee may not want to take their leave if their family members can't get holidays at the same time. Of course, some employees simply love their work and almost need to be made to take leave. Whatever the scenario, before you know it, the employee has racked up a large amount of leave, which can be problematic for an employer when the time comes to pay out these potentially large sums.

Show me the money

The change of most interest to employees will undoubtedly be the ability to cash out some of their accrued annual leave. The new rules state that:

• First and foremost, the application for leave to be cashed out must be made in writing and signed by both the employee and the employer.
• The amount of leave to be cashed out must be clearly stated, as must the amount to be paid and the date on which it will be paid.
• No more than two weeks annual leave may be cashed out in any twelve (12) month period.
• The employee must be left with a minimum of four weeks annual leave up their sleeve.

Options for excessive leave

Some 80 of the 122 modern awards now have an "excessive annual leave" model term included, meaning that a worker has more than eight weeks annual leave accrued (or 10 weeks for shift workers).   Once leave gets to this point it may become necessary to see a reduction in the time accrued, to avoid excessive payouts later.

So what happens if agreement between the two parties on how to reduce or eliminate the excessive leave can't be reached?   One of two things can occur.   Either the employer can direct the employee to take one or more periods of leave, or the employee may give notice that they are intending to do so.

In the case of the employee, they may only give notice if the leave has been accrued for more than six months and they haven't been directed previously by their employer to reduce their leave. Where employees meet the criteria, employers are required to grant the leave.

In any event, any leave taken must be for a minimum of one week and must be taken between eight weeks and twelve months from the date of the direction or notice of intention. Additionally, the employee's remaining annual leave must not be less than six weeks.

Further information is available by contacting the Fair Work Commission on 1300 799 675 or by visiting their website at https://www.fwc.gov.au/about-us/news-and-events/decision-summary-published-annual-leave-4-yearly-review-modern-awards

Alternatively, contact Employsure on 1300 798 990 and quote ERA0969 for free advice for employers, or check out their website at http://employsure.com.au

All in all, these welcome changes – which came into effect on 29 July – are positive ones from which both employees and employers will benefit.