Redundancy: does parental leave absence affect notice period?

Q&A

Redundancy: does parental leave absence affect notice period?

When calculating notice of termination, is unpaid parental leave counted as service? Paul Munro explains.

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When calculating notice periods, is unpaid parental leave counted as service?

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Q Our company will make several positions redundant at the end of this financial year. The employees have been consulted on the situation and been offered post-employment assistance. In discussions with the employees, it was decided that employment will continue until 30 June, when they will be paid the equivalent period in lieu of notice.

One of the affected employees has been employed by the company for more than five years, but took 12 months' unpaid parental leave several years ago. The appropriate period of notice (or payment in lieu) is based on the employee’s years of continuous service with the employer, in this case, four years.

The Fair Work Act appears to provide that a period of unpaid leave does not count as service for the purposes of the National Employment Standards. It is our understanding that an employee’s absence on unpaid parental leave would therefore not count as service.

Does this mean we are required to pay three weeks’ pay in lieu of notice (based on four years’ continuous service with the employer)?

A Under this circumstance, the employee would be entitled to receive four weeks’ pay in lieu of notice on termination. The period of unpaid parental leave counts as service for the purpose of determining the appropriate period of notice of termination to be given by the employer.

The Fair Work Act (s22(4)) provides a different definition for “service” with respect to notice of termination.

The only absence excluded from service for the purposes of notice of termination (or payment in lieu) required to be given by the employer to an employee is any period of unauthorised absence, such as a period of industrial action engaged in by employees or any other absence from work contrary to the direction of the employer.

Parental leave provided under the National Employment Standards would be considered an unpaid authorised absence; consequently, unpaid parental leave would count as service with the employer.

In this case, the employee is deemed to have served a total of more than five years' continuous service with the employer (including the period of unpaid parental leave) and would be entitled to receive four weeks’ pay in lieu of notice of termination.

An employee with at least two years' continuous service with the employer and who is aged over 45 years is entitled to an additional one week’s notice (or payment in lieu).

The bottom line: Under the Fair Work Act, a period of unpaid parental leave counts as service for the purpose of calculating the appropriate period of notice required to be given by an employer under the National Employment Standards.
 

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