CCIWA’s Employee Relations team are often asked questions about how annual leave needs to be paid. Here’s a recent Q&A.

Q: National minimum awards changed this month, what rate of pay do I use for annual leave accrued before this rise? Is anything payable at the old rate?

A: The entitlement to annual leave for national system employees can be found under the National Employment Standards of the Fair Work Act 2009 (Cth) (the Act).

Under section 90 of the Act: “If, in accordance with this Division, an employee takes a period of paid annual leave, the employer must pay the employee at the employee’s base rate of pay for the employee’s ordinary hours of work in the period.”

This proposes to employers that when an employee seeks to take annual leave, the payment of said leave shall be done at the employee’s current rate of pay at the time the leave commences, not at the rate of pay when it was accrued.

This includes instances where the employee takes annual leave, proposes to cash out annual leave,and for payment of accrued leave upon termination or taken leave at the employer’s initiation.

While this may result in managers encouraging their employees to take their accrued leave prior to changes in wages, to prevent paying leave at the new minimum wage, it is important to note that employers are limited in the circumstances in which they can force employees to take leave.

For award and agreement-free employees, employers may only direct an employee to take leave:

  • where an employee has accrued an ‘excessive’ amount of paid annual leave; or
  • the employer’s enterprise is being shut down for a period (for example, between Christmas and New Year).

For employees covered by an award or enterprise agreement, the industrial instrument may contain additional requirements for the employer to meet in order to lawfully direct an employee to take leave.

For example, the Nurses Award 2010 defines excessive accrued annual leave to be 10 weeks paid leave or 12 weeks paid annual leave for a shift worker – and is subject to further provisions dictating how an employer may direct the leave be taken. For example, the direction must not result in the employee having less than six weeks accrued annual leave after the excessive leave is taken.

Given the sometimes complex nature and variety of rules that can govern certain leave arrangements, CCIWA’s Employee Relations Advice Centre can help interpret and provide advice on best practice when negotiating and requiring an employee to take leave.

Free employee relations advice is just a phone call – or download – away for most CCIWA Members. Visit CCIWA’s website or call the team today on (08) 9365 7660.