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Wednesday 24th June 2015
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The new rules on cashing out
annual leave
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In today's Workplace Bulletin:
- Charles Power on the FWC’s proposed new rules on cashing out annual leave
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Dear Reader,
As we’ve discussed over the past week and a half, changes may be coming to the way your business handles your annual leave obligations.
The Fair Work Commission has been reviewing annual leave provisions as part of its lengthy 4-yearly review of modern awards. |
Now, in a mammoth 476-paragraph decision, they’ve handed down some decisions about what will be changing, including:
- Likely changes to when employers can direct employees to take leave;
- Changes to how annual leave can be cashed out;
- Likely changes to when annual leave can be granted in advance, and;
- Provision for annual leave to be paid as part of the employee’s ordinary pay cycle, if they are paid by electronic funds transfer.
The FWC will be tabling the proposed changes for public comment before they are implemented. But it’s more likely than not your business will have some new rules to follow on how annual leave is dealt with in the coming months.
Last week, Charles wrote to you about the new rules on directing employees to take accrued leave. As you saw, it’s not a free-for-all. There are a number of rules you will have to follow to do it lawfully.
Similarly, the proposed rules on cashing out annual leave will mean greater flexibility to employers and employees – but also include a number of procedural safeguards.
Charles Power, Editor-in-Chief of the Employment Law Practical Handbook, has assessed the FWC’s decision in detail – and in doing so, he’s probably saved you the better part of a weekend.
Below, he discusses how the new rules on directing employees to cash out leave will work.
Until next time,
Joseph Nunweek
Editor, Workplace Bulletin
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The FWC’s proposed new rules
on cashing out annual leave
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Dear Reader,
In my bulletin last Wednesday, I discussed a recent Full Bench decision of the Fair Work Commission ([2015] FWCFB 3406) that will insert new provisions regarding annual leave into all modern awards.
One of the most significant changes is a clause permitting the cashing out of accrued annual leave. |
What was the situation until now?
The Fair Work Act states that modern awards can include provision for cashing out annual leave, but there is currently only one award which includes this provision (the Seafood Processing Award).
For the remainder of employees covered by modern awards, cashing out of annual leave is not permitted because the awards are silent on this issue.
Enterprise agreements can permit cashing out. Award and agreement free employees can also cash out, provided they satisfy the provisions of section 93 of the Fair Work Act 2009.
Those provisions state that cashing out must not leave an employee with a paid annual leave accrual of less than 4 weeks, and that each occasion when leave is cashed out must be agreed to separately in writing.
How will the changes work?
The FWC Full Bench has decided that all modern awards should include a cashing out provision similar to that in section 93 of the Fair Work Act.
This will permit you to agree with an employee to cash out accrued annual leave subject to the following requirements:
- each cashing out of a particular amount of accrued paid annual leave is a separate agreement between you and the employee;
- that agreement must be in writing and retained as an employee record;
- the agreement must state the amount of accrued leave to be cashed out and the payment to be made to the employee, as well as the date on which the payment is to be made;
- the agreement must be signed by you and the employee and, if the employee is under 18 years of age, the employee’s parent or guardian;
- the employee must be paid at least the full amount that would have been payable to the employee had the employee taken the leave at the time that it is cashed out (including leave loading, if that would have been paid);
- the employee must retain a minimum of at least 4 weeks accrued leave after cashing out, and;
- employees may not cash out more than two weeks’ accrued annual leave in any 12-month period.
You do not have to agree to an employee’s request to make a cashing-out agreement. Conversely, you cannot mislead an employee about their entitlements under any cashing-out agreement. Nor can you use undue influence or pressure on an employee to make a cashing out agreement.
Bear in mind that the FWC will make a number of other decisions regarding common issues across all modern awards in the next 12 months. Our team at the Employment Law Practical Handbook are monitoring these developments closely – and we’ll be keeping you in the loop.
Regards,
Charles Power
Editor–in–Chief
Employment Law Practical Handbook
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