Tuesday, 6 October 2015

Employers Granted More Power in Controlling Leave Balances

While most employees and employers are familiar with the minimum legislative entitlement to annual leave, there has been confusion surrounding an employer’s right to direct an employee to take annual leave.

The Fair Work Act provides that award/agreement free employees can be directed to take annual leave provided the direction is reasonable.

However, until the recent ruling of the Fair Work Commission, award covered employees could only be directed to take annual leave if the applicable award contained provisions enabling the employer to do so. Many awards were silent on the issue, leading to uncertainty and frustration particularly where employees have considerable leave balances. Excessive leave balances can create an unnecessary financial liability to employers, particularly if those employees are promoted or receive wage increases, which then increases the dollar value of the accrued leave.

Effective from 2016 all awards will provide an employer with the ability to direct employees to take annual leave, if the employee has accrued an excessive amount of annual leave. Excessive annual leave has been defined as 8 weeks or more (10 weeks for shift workers). Employers will be able to direct employees to take leave provided;

  • The employee retains a balance of 6 weeks, and
  • The employer first meets with the employee to genuinely attempt to agree on a plan to minimise excessive accruals.
  • Once this new provision takes effect, we recommend that employers consider amending their contracts and policies to reflect the changes

HR Legal can review employment contracts and annual leave policies to ensure consistency with these changes. We can also advise on enterprise agreements to ascertain, if and, how they relate to award changes.


This article was produced by HR Legal. It is intended to provide general information only in summary format on legal issues. It does not constitute legal advice, and should not be relied on as such.

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