Part-time to full-time: how is annual leave affected?

Part-time to full-time: how is annual leave affected?
By Paul Munro on 13 June 2017 When a part-time employee becomes full-time, how does it affect annual leave entitlements?

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Q We have an employee who changed from part-time employment to full-time employment on 1 June. The employee previously worked 24 ordinary hours per week but now works 38.

She has requested four weeks’ annual leave from 1 July, which has been accepted by the company. The employee has complained that their balance of annual leave will be docked 152 hours which will result in a balance of less than one week’s annual leave.

The employee presumed their annual leave balance (as well as their personal/carer’s leave balance) would be adjusted to equate to her full-time employment. The National Employment Standards provides that the minimum entitlement to paid annual leave is four weeks per year. We have two questions in relation to this change.

What happens to the annual leave accrued as a part-time employee – does it convert to full-time or does the current balance just carry over? At what rate will the employee be paid if taking annual leave in the future?

A An employee’s ordinary hours determine the rate at which annual leave accrues and also the entitlement to payment when annual leave is taken. For example, a part-time employee whose ordinary hours each week are 24 hours will accrue two weeks’ leave (48 hours) over a six-month period, while a full-time employee whose ordinary hours each week are 38 will also accrue two weeks’ leave (76 hours) over the same period.

Leave is payable at an employee's 'base rate of pay' unless otherwise provided by the applicable modern award or enterprise agreement. If an employee changes the basis of their employment there is no change to their balance of accrued leave. However, the future rate of accrual will be different based on an employee's increased number of ordinary hours.

The Fair Work Act (s87(2)) states that annual leave accrues progressively according to an employee’s ordinary hours of work and is cumulative. In this case, during the employee’s part-time employment, the rate of accrual was at the equivalent rate of 96 hours per year (based on a 24-hour week). From the start of full-time employment (June 1), the employee will accrue leave at the equivalent rate of 152 hours per year.

For example, if the employee had six months' service as a part-time employee (24 hours) and six months' service as a full-time employee (38 hours), the total accrual of annual leave after 12 months' service would be 48 hours (representing six months' accrual at part-time hours) + 76 hours (representing six months accrual at full-time hours). This means the employee will have an accrual balance of 124 hours after 12 months' continuous service with the employer.

If, in this case, the employee takes four week’s paid annual leave from 1 July 2017 she will be entitled to be paid for 38 ordinary hours at her base rate of pay (or ordinary pay if prescribed by the applicable award or agreement) for each week of annual leave, with 152 hours to be deducted from her annual leave balance.

The principle relating to the accrual of paid annual leave also applies to personal/carer’s leave.

The bottom line: The employee’s ordinary hours determine the rate at which the entitlement to annual leave accrues. Payment for a period of annual leave is at the employee’s base rate of pay, unless otherwise provided by the applicable modern award or enterprise agreement.
 

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