The legislation surrounding annual leave has been the subject of change in recent years, enabling employers to cash out their annual leave.
Cashing out annual leave
Eligible employees are now able to cash out their annual leave, rather than take the time off work. This can occur if the employee is covered by a Registered Agreement and has at least four weeks of annual leave after the cash out. A written agreement would be required each time the cash out occurs and employees are not allowed to cash out more than two weeks every twelve months.
Taking annual leave in advance
Annual leave can now be taken before the employee has accrued the leave. This is subject to a written agreement from the employer, specifying how long and when the leave is to take place.
Large annual leave balances
Under some awards, employers can now direct employees to take their annual leave if the employee has more than eight weeks accrued. A written letter giving at least eight weeks of notice will be required and there are specific rules about how long the leave has to be, which varies from award to award.
Paying annual leave
Previously, most awards required employees to be paid before taking annual leave. A new clause has been introduced to these awards, which allow employees to be paid their usual pay cycle if the method of payment is by electronic funds transfer.
Lessons for employers
- Employers are now allowed to direct employees to take leave if they have excessive leave accrued. This affords more control over when employees are away on leave. Though it is important to note that employers can’t force or pressure an employee to cash out annual leave
- During leave, employees can now be paid using their usual pay cycle.
- Employers should consider putting in place an annual leave policy to make sure that employees and managers are up to speed on the requirements under the relevant Award and know exactly where they stand.
- If employers have an existing policy, they will need to make sure that it reflects the current state of the law.
Lessons for employees
- Leave can now be cashed out instead of taking the time off and could also be taken in advance of accrual.
- If you’re covered by a registered agreement, check it to assess your annual leave cash out eligibility. To find an enterprise agreement, go to the Fair Work Commission website.
Please contact JFM Law on (02) 9199 8597 to speak to our specialist employment law team, or you can email us at wehelp@jfmlaw.com.au. We can help you figure out if your business is subject to the changes in annual leave and how it affects your practices and procedures. The first phone consultation is always free.
The information contained in this post is current at the date of editing – 3 October 2024.