The Fair Work Commission has now finalised annual leave terms that it intends to include in all modern awards going forward. The new terms are designed to address current inconsistencies between modern awards, and ensure that modern awards to reflect industry practices regarding annual leave.

The new terms will introduce the following rights for employers and employees over and above what is currently provided in existing modern awards:

  • Excessive annual leave – where an employee has accrued more than eight weeks of annual leave, the employer will be able to direct the employee to take some of that leave. The employer must consult with the employee first.
  • Cashing out annual leave – an employee will be able to cash out a maximum of two weeks annual leave every 12 months, provided they retain at least four weeks’ accrued leave after cashing out part of their leave balance.
  • Granting leave in advance – an employee may take leave in advance, with agreement from their employer. If the employee’s employment is terminated before they have accrued the leave taken in advance, the employer will be entitled to deduct the leave taken but not yet accrued from the employee’s final pay.
  • Annual leave pay – employers will be able to pay employees on annual leave by EFT as part of the employer’s usual pay cycle. This corrects the requirement in some existing awards that employees be paid before they take annual leave.

The full model terms can be found in the Commission’s decision here.

The Commission has invited further submissions about the proposed terms and will be holding a hearing in November before making any final decision about whether to include the new terms in modern awards. The Commission has also indicated it will be considering at the hearing whether to add a further model term that clarifies how annual leave should be paid on termination.