As part of the four yearly review of modern awards, the Fair Work Commission Full Bench (FWCFB) has decided to vary the annual leave provisions in the majority of modern awards in respect of the following matters:

  • cashing out annual leave;
  • excessive annual leave accruals;
  • granting annual leave in advance; and
  • payment of annual leave during leave

Cashing out annual leave

Award covered employees can only cash out annual leave if the relevant award allows for it. The majority of the modern awards will be varied to include a model term that allows employees to cash out some of their annual leave, with certain conditions. The conditions include:

  • A maximum of two weeks of annual leave can be cashed out every 12 months.
  • The employer and employee must enter into a separate written agreement containing specific provisions about the cashing out of the leave.
  • The employee must have an entitlement to at least four weeks of paid annual leave remaining after the leave is cashed out.

The only awards excluded from this amendment are those in the maritime industry and the Security Services Industry Award 2010. All other modern awards will include this amendment.

Excessive annual leave accruals

83 modern awards will be varied to include a model term that deals with excessive annual leave accruals. An employee has an excessive annual leave accrual if they have more than eight weeks of accrued annual leave (or 10 weeks for a shift worker).

Subject to certain conditions, if an employee has an excessive annual leave accrual, employers will have the right to direct employees to take annual leave and employees will have the right to require an employer to grant a period of annual leave.

The FWCFB will continue to consider whether to include the provisions in the remaining modern awards.

Granting annual leave in advance

Modern awards will be varied to include a model term that allows an employer and employee to agree, in writing, for the employee to take paid annual leave in advance of it accruing. If the employee has not accrued enough annual leave to make up the deficit by the time their employment ends, the employer is then entitled to make equivalent deductions from the employee’s termination payments. Some modern awards already include a similar provision.

Payment of annual leave during leave

There are currently 51 modern awards that require an employer to pay an employee for annual leave in advance of the employee taking the leave. These modern awards will be varied to allow the employer to pay the employee while they are on annual leave in accordance with the usual pay cycle if they are paid by electronic funds transfer.

Annual leave provisions not varied

The FWCFB also considered making variations to the annual leave provisions in all awards in relation to an annual close down period, purchased annual leave and payment of annual leave entitlements on termination. The FWCFB decided, for various reasons not to vary the modern awards in respect to these matters.

Implementation

The date for the implementation of the above amendments is yet to be determined.

The amendments will apply to most modern awards, however they do not apply to all of them. It is important to check the relevant modern award before implementing any of the above changes.