Can you transfer personal leave to annual leave?

Can you transfer personal leave to annual leave?
By Paul Munro on 13 November 2017 Can employees transfer some of their accrued personal/carer's leave to their annual leave balance?
This question was recently sent to our Ask an Expert service.

Q We have several employees with a substantial amount of accrued paid personal/carer’s leave. One employee has requested transferring a portion of their accrued personal/carer’s leave to their annual leave balance because of low usage and the expectation this will continue into the future. Other employees have also shown an interest in this arrangement.

If the employees agree, is it possible for the employer and an employee to permit the transfer of personal/carer’s leave to annual leave?

A Such an arrangement would breach the minimum provisions under the National Employment Standards as paid personal/carer’s leave continues to accrue and must be available for the purpose prescribed by the legislation – that is, payment when an employee is absent due to personal illness or injury or to care for an immediate family member or member of the employee’s household.

Because the Fair Work Act would not legally recognise this arrangement an employee could "double-dip", meaning there is a risk that if this arrangement was introduced and there was subsequently a claim if the employee suffered a long-term illness or injury the employer would be directed to restored the balance, effectively receiving the benefit twice.

The provisions of the National Employment Standards cannot be traded off or bargained away in an enterprise agreement or a modern award. This also includes the terms of a contract of employment for an award/agreement free employee.

Cashing out personal/carer’s leave

A possible alternative is to include cashing out of personal/carer’s leave terms in the applicable enterprise agreement where it is not permitted by the applicable modern award. Very few modern awards permit the cashing out of personal/carer’s leave. While the Fair Work Act does not permit the transfer of personal/carer’s leave to annual leave, it is possible for an enterprise agreement to contain terms which permit the cashing out of paid personal/carer’s leave.

Section 100 of the Act states that paid personal/carer’s leave may only be cashed out in accordance with the terms of a modern award or enterprise agreement. If the applicable award or agreement does not contain cashing out terms, then it is not permitted. An award/agreement free employee cannot agree with their employer to cashing out any accrued paid personal/carer’s leave under the terms of their contract of employment.

Enterprise agreements

The Fair Work Act (s101) provides that a clause in an enterprise agreement permitting cashing out personal/carer’s leave is permissible subject to that clause conforming to the three conditions referred to in sections 101(2)(a)-(c)), which are:
  • paid personal/carer’s leave must not be cashed out if the cashing out would result in the employee’s remaining accrued entitlement to paid personal/carer’s leave being less than 15 days; and
  • each cashing out of a particular amount of paid personal/carer’s leave must be a separate agreement in writing between the employer and the employee; and
  • the employee must be paid at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has foregone.
The bottom line: The minimum provisions of the National Employment Standards cannot be traded off or bargained away under any employment arrangement.

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