Employees can now cash out annual leave, in win for employers dealing with excessive leave

Employees covered by most Australian workplace awards now have the option of cashing out some of their annual leave.

The change, which comes into effect this week, is due to the Fair Work Commission updating 112 modern workplace awards to reflect recent changes to annual leave terms. As well as giving workers the option to cash out some of their annual leave, some employees will have the option to take annual leave in advance.

The changes took effect on July 29 and mean workers covered by the awards can cash out annual leave as long as they have four weeks of leave remaining after cashing out. The changes also limit workers to cashing out a maximum of two weeks every 12 months.

Other significant changes include modifications to 116 awards to allow taking of annual leave before the worker has accrued it, providing that a written agreement is formed between the employee and employer. This agreement must include the amount of leave taken, and the day the leave will start.

The changes are expected to affect as many as 2 million Australian employees whose employment is covered by modern award agreements, according to Fairfax.

The Commission has also revised 80 award agreements to insert terms regarding managing excessive leave. Under those agreements, employers will be able to force employees to take annual leave if the employee has accrued excessive annual leave, which is defined as eight weeks or more.

Employers must notify the employee in writing that they must take annual leave, and must also give employees at least eight weeks notice.

The changes also permit employees with excessive leave to take the entitled leave in circumstances where the employer has not agreed to the leave, so long as the employee “genuinely tried to reach agreement with an employer”.

“The employee may give a written notice to the employer requesting to take one or more periods of paid annual leave,” the Commission said in the summary of its decision on annual leave provisions.

In this situation, employees cannot take more than four weeks paid annual leave in a 12-month period.

The Commission has implemented a 12-month buffer period for employees taking excessive leave, “in order to address situations where a significant proportion of an employer’s workforce currently have excessive leave accruals”.

COSBOA welcomes “sensible” changes

Peter Strong, chief executive of the Council of Small Business Australia, told SmartCompany the changes are “very sensible”.

“These changes bring in some common sense and will be beneficial for employers and employees,” Strong says.

“It’s good for the health of employees too, if you have leave, take it or cash it out. It’s there for a reason.”

With regards to the changes to excessive leave, Strong believes most small businesses should be able to work it out with their employees rather than force them to take it.

“In the past you couldn’t do anything about employees with excessive leave, so it’s good to have this option,” Strong says.

“The good thing about most small businesses is that you should be able to sit there and work it out, so these measures wont always be needed.”

However, Strong says he will be wary for the first 12 months, wanting to make sure the changes can’t be used to “attack employers or employees”.

“These are better options for management and better options for employees who need a break. It all sounds good, but lets manage it properly,” he says.

The changes are a result of the Commission’s four-yearly review of modern awards. The findings of the September 2015 review determined the terms regarding cashing out of annual leave, which in May 2016 were then redrafted in plain language and drafts of the awards were published.

After reviewing changes proposed by some parties, the Commission then issued the final decision regarding the award changes on June 24, giving industries until July 29 to oppose any of the changes.

A list of awards affected by these changes can be found on the Fair Work Commission’s May decision documentation.