How unpaid leave affects redundancy and notice

Q&A

How unpaid leave affects redundancy and notice

How does unpaid (in this case, parental) leave affect the calculation of service when calculating redundancy pay and the period of notice? A number of factors affect this situation, including different definitions of continuous service and service prior to 1 January 2010.

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How does unpaid (in this case, parental) leave affect the calculation of service when calculating redundancy pay and the period of notice? A number of factors affect this situation, including different definitions of continuous service and service prior to 1 January 2010.
 
This question was recently sent to our Ask an Expert service.
 
Q  We have decided to make a number of administrative positions redundant at the end of December. This will mean that, unfortunately, three employees will have their employment terminated. One employee has been employed since early December 2008; however, she took 12 months unpaid parental leave during the course of her employment.
 
Because the parental leave was unpaid, does this count as service for the purposes of determining the amount of redundancy pay and the period of notice? She is employed under the Clerks — Private Sector Award 2010 and the company employs approximately 75 employees.
 
A  There are a number of issues to consider in this circumstance. These include continuous service with respect to redundancy pay, service prior to 1 January 2010 under a pre-modern award instrument, and continuous service with respect to the appropriate period of notice of termination by the employer.
 
Redundancy pay
 
Under the Fair Work Act 2009, redundancy pay is based on the number of years of continuous service the employee has completed with their employer. The Act (s12) defines ‘continuous service’ as all employment with the employer, except for the following absences:
    • any period of unauthorised leave
    • any period of unpaid leave or authorised unpaid absence, other than community service leave and a period of stand down (the latter means when the employer ceases paying wages to employees for whom it has no work, until work is again available, but the employee remains employed by the employer).
This means that any authorised unpaid absence (such as leave without pay) does not count as service for the purposes of calculating redundancy pay and is excluded from any calculation of continuous service.
 
In this case, the employee has completed four years of continuous service with the employer (excluding the period of unpaid parental leave) and would be entitled to receive eight weeks redundancy pay, payable at the employee’s base rate of pay. The base rate of pay is the employee’s ordinary weekly rate of pay for their ordinary hours of work, excluding incentive-based payments and bonuses, loadings, monetary allowances, overtime or penalty rates, and any other separately identifiable amounts.
 
Clerks — Private Sector Award 2010
 
Because the employee would have been employed under a notional agreement preserving state awards (NAPSA) prior to 1 January 2010, reference should also be made to the Clerks — Private Sector Award 2010 (cl 14.5). This Award contains a transitional provision stating that if the applicable NAPSA would have entitled the employee to redundancy pay in excess of the employee’s entitlement to redundancy pay under the National Employment Standards (NES), then the more beneficial pay under the NAPSA applies. This provision will cease to operate on 31 December 2014.
 
Notice of termination
 
Note also that the Fair Work Act (s22(4)) provides a different definition of ‘service’ in relation to notice of termination. The only absence excluded from service for the purposes of calculating the amount of notice of termination required to be given by the employer to an employee is any period of unauthorised absence (eg unprotected industrial action).
 
This means that an absence on unpaid parental leave will count for the purpose of determining the appropriate period of notice. In this case, the employee has completed five years of service with the employer and is entitled to receive four weeks notice (or payment in lieu thereof). If the employee is aged over 45 years she is entitled to an additional one week’s notice (or payment in lieu).
 


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