Annual leave and personal/carer's leave - employer questions about WorkChoices


Annual leave and personal/carer's leave - employer questions about WorkChoices

This article is the third in a series that summarises the employer position under WorkChoices. The focus of this article is on annual leave and personal/carer's leave in the new WorkChoices environment.


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This article is the third in a series that summarises the employer position under WorkChoices. The focus of this article is on annual leave and personal/carer's leave in the new WorkChoices environment.

While many views have been given on some of the issues, nothing is conclusive until determined by the relevant courts.

These articles provide a snapshot of the types of questions that have frequently been asked by employers since the introduction of WorkChoices.

Note re pre-reform agreements

It should be noted that, unless otherwise stated, the answers to these questions do not apply to an employee covered by a pre-reform certified agreement, preserved State agreement, pre-reform Australian Workplace Agreement (AWA) or a preserved individual State agreement.

Annual leave and WorkChoices

Annual leave accrued prior to the introduction of WorkChoices is calculated using which source of entitlement?

With respect to annual leave, the Standard refers to leave accrued 'under this Division', meaning the accrual of leave and the payment of leave at the appropriate ordinary rate of pay only applies to any annual leave accrued from 27 March 2006. Therefore, leave accrued prior to this date is subject to the relevant annual leave provision in the applicable award or State/Territory legislation.

This may result, for example, in a different calculation of ordinary pay or continuity of service for the pre-WorkChoices accrued annual leave as many industrial instruments provided for the inclusion of payments such as average bonuses and commissions. These payments are not included in the definition of 'ordinary pay' for annual leave accrued under WorkChoices.

Can I cash out all or some of an employee's annual leave that accrued prior to WorkChoices?

The answer is yes, although it may only be done through a new workplace agreement, ie a collective agreement or an Australian Workplace Agreement (AWA).

This can be done even where the relevant award or annual leave legislation prohibited the payment in lieu of taking annual leave. A similar thing may be done with long service leave, where prohibiting payment in lieu of leave is common amongst the various state/territory legislation.

Any agreement between the parties, other than through an AWA or collective agreement under WorkChoices, to cash out annual leave is prohibited.

Does annual leave or long service leave that is cashed out under an AWA or collective agreement attract the Superannuation Guarantee Charge (SGC)?

The answer is that it has not been tested yet, however there is a considered view amongst taxation lawyers that payment due for annual leave actually taken is considered to be ordinary time earnings for SGC purposes, so any leave cashed out could be similarly treated and be subject to the superannuation contribution.

Does a cashed out amount of annual leave attract the annual leave loading which may be prescribed by the relevant pre-reform award or NAPSA?

This would depend on the wording of the award.

Most clauses prescribe the (usually) 17 1/2% loading on the ordinary pay applicable when the employee proceeds on annual leave. Pre-WorkChoices awards would not have been drafted with this possibility in mind because awards and annual leave legislation usually prohibited payment in lieu of annual leave. For example, the Metal, Engineering and Associated Industries Award states that 'employees who would have worked on day work only had they not been on leave ... ' are entitled to the annual leave loading. This wording suggests the loading only applies when an employee actually takes annual leave.

Our company has a shut down period over Christmas-New Year for approximately three weeks. Some employees have only completed six months service. Can they be stood down without pay for the third week?

The answer is no.

One of the consequences of the WorkChoices annual leave Standard is that an employer cannot send an employee on a period of annual leave where the employee has insufficient accruals to cover the period. Under these circumstances, an employee would be paid for the third week of the close down regardless of their annual leave balance.

Personal/Carer's Leave and WorkChoices

Is the Australian Fair Pay and Conditions Standard (AFPCS) considered more generous than a personal/carer's leave provision contained in a pre-reform Federal award or NAPSA that prescribes a greater amount of personal/carer's leave than the Standard from (say) the 3rd year onwards?

Some pre-WorkChoices awards contain personal/carer's leave provisions that provide, for example, five days in the first year, 10 days in the second year, and 12 days from the third year and thereafter. Because the AFPCS applies to the employee's individual situation, employees in their third or subsequent year of employment with the employer would, under these circumstances, be covered by the personal/carer's leave provisions under the award as it is considered more generous than the Standard.

Can any personal/carer's leave be cashed out under WorkChoices?

The answer is yes for an employee under a workplace agreement made under WorkChoices or a written contract of employment that provides for cashing out of personal/carer's leave and the employee makes a written request for the cashing out.

Under the Regulations to the WRAct, the only amount of personal/carer's leave that may be cashed out is leave in excess of 15 days each year (pro rata for part-time employees) that have been accrued under WorkChoices. The employee must have a balance of at least 15 days after cashing out.

For example, under a new workplace agreement an employee with 20 days personal/carer's leave may request up to five days of leave be cashed out, leaving a balance of 15 days. Where the cashing out provisions are provided under a pre-reform certified agreement, preserved State agreement or a pre-reform AWA, they will continue to apply until the pre-reform agreement is terminated or replaced by a new workplace agreement.

Likewise, an employee employed under a pre-reform award or NAPSA is subject to the personal/carer's leave provisions under the respective industrial instrument.


Awards, agreements, contracts - employer questions about WorkChoices

State legislation and Wages cases - employer questions about WorkChoices

Common terms and expressions under WorkChoices

WorkChoices updates - what you need to know - Minimum Conditions Standard



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