News & Views

The Fair Work Commission has now finalised the model terms in relation to cashing out annual leave, leave in advance, payment by EFT and excessive leave for most modern awards including the Electrical, Electronic and Communications Contracting Award 2010 (the “Electrical Contracting Award”). Final determinations varying modern awards have been issued with provisions generally taking effect from the first pay period that starts on or after 29 July 2016. There is an exception to this commencement date in the case of the clause enabling employees to take leave where they have excessive leave which comes into operation from the first pay period that starts on or after 29 July 2017.

A summary of the model clauses is provided below:

Cashing out of annual leave

A revised cashing out model term will be inserted into most modern awards with the term taking on the following features:

• Paid annual leave must not be cashed out except in accordance with an agreement that complies with the clause.

• Each cashing out of a particular amount of paid annual leave must be the subject of a separate agreement.

• The agreement needs to be in writing and must:

  • state the amount of leave to be cashed out and the payment to be made to the employee for it; and

  • state the amount of leave to be taken in advance and the date on which the leave is to commence; and

  • be signed by the employer and employee and, if the employee is under 18 years of age, by the employee’s parent or guardian.

• The payment must not be less than the amount that would have been payable had the employee taken the leave at the time the payment is made.

• An agreement must not result in the employee’s remaining accrued entitlement to paid annual leave being less than 4 weeks.

• The maximum amount of accrued paid annual leave that may be cashed out in any period of 12 months is 2 weeks.

• The employer must keep a copy of any agreement as an employee record.

An example of the type of agreement required is set out in a schedule to the Electrical Contracting Award although there is no requirement to use it.
 
Leave in advance

The model clause, which replaces clause 28.7 of the Electrical Contracting Award has now been finalised by the Commission and has the following features:

•  An employer and employee may agree in writing to the employee taking a period of paid annual leave before the employee has accrued an entitlement to the leave.

• An agreement must:

  • state the amount of leave to be taken in advance and the date on which the leave is to commence; and

  • be signed by the employer and employee and, if the employee is under 18 years of age, by the employee’s parent or guardian. 

• The employer must keep a copy of any agreement as an employee record.

• If, on the termination of the employee’s employment, the employee has not accrued an entitlement annual leave already taken in accordance with an agreement under the clause, the employer may deduct an amount equal to the amount that was paid to the employee from the employee’s termination pay.

An example of the type of agreement required is provided in the form of a schedule to the Electrical Contracting Award but there is no requirement to use the form of agreement set out in the schedule.

EFT and paid annual leave
Modern awards, including the Electrical Contracting Award which currently require the employer to pay an employee for annual leave prior to the employee taking the leave have been varied to insert a term enabling employees who are paid by electronic funds transfer to be paid in accordance with their usual pay cycle while on paid annual leave.

Excessive annual leave.

The finalised model term, which replaces clause 28.5 of the Electrical Contracting Award,  enables employers to direct employees with excessive leave balances to take leave if:

• an employee has accrued more than 8 weeks’ paid annual leave (or 10 weeks’ annual leave for a shift worker);

• an employer has genuinely tried to reach agreement on how to reduce or eliminate the excessive accrual but agreement is not reached.

 The direction:

• is of no effect if the employee would have less than 6 weeks’ accrued leave remaining after the direction;

• must not require the employee to take less than one week leave;

• must not require the employee to take the leave less than 8 weeks or more than 12 months after the direction is given;

• must not be inconsistent with any leave arrangement agreed by the employer and employee.

If an employee is given a direction they may request to take leave as if the direction had not been given.

A clause will also come into operation from 29 July 2017 enabling employees to make a written request to take leave which the employer must grant in circumstances where:

• the employee has genuinely tried to reach agreement with an employer but agreement is not reached;

• the employee has had an excessive leave accrual for more than six months at the time of giving the notice;

• the employee has not been given a direction by the employer to take leave (as described above) that would eliminate the employee’s excessive leave accrual;

• if granted, the employee’s remaining leave balances will be at least 6 weeks;

• the period of leave is for at least one week;

• the leave period requested is no less than 8 weeks or more than 12 months after the notice is given;

• the employee has not requested by such a notice more than 4 weeks’ paid annual leave (or 5 weeks’ paid annual leave for a shift worker) in any period of 12 months.

A copy of the varied modern award can be obtained from the Fair Work Commission website shortly at www.fwc.gov.au.

For enquiries, please contact Gordon Jervis on 02 9744 1099 or email gordon.jervis@neca.asn.au