Award Annual Leave Changes

Annual Leave Changes

Award Annual Leave Changes

Annual Leave –Is your business across changes in Awards to cashing out annual leave, taking excessive leave & taking annual leave in advance?

On 29 July 2016, a number of modern Awards were varied to implement changes regarding cashing out of annual leave, directions to take excessive annual leave and taking annual leave in advance. The changes are summarised as follows:

Cashing out annual leave:

The majority of Awards now enable employees to cash out annual leave. These are significant changes given that previously, employees covered solely by an Award were usually not permitted to cash out such leave. Under the changes, Award reliant employees can now cash out annual leave provided the following requirements are satisfied:

  • The employee must have at least 4 weeks accrued annual leave remaining after the ‘cashing out’
  • There must be a signed written agreement between the employer & employee
  • The maximum amount of leave that can be cashed out in any 12-month period is two (2) weeks
  • The employee must receive no less payment that they would have received if the leave had been taken. Therefore, such cashing out would usually include the payment of annual leave loading.

Excessive annual leave:

  • ‘Excessive annual leave’ arises where an employee has accrued more than 8 weeks’ annual leave.

Employer initiated directions: Under the changes, an employer can direct an employee to take leave, if the employer and employee cannot reach agreement. In order for this direction to be legally valid & enforceable, the following requirements must be met.

  1. The direction to take annual leave must be in writing
  2. Provide the employee with 8 weeks’ notice of when the leave will commence
  3. The direction must not result in the employee having less than 6 weeks’ annual leave
  4. The employer cannot require the employee to take less than 1 week of leave

Employee initiated notice: Further to the above, under the changes, some Awards now allow employees with excessive annual leave balances to issue a notice to their employer that they will be taking leave. This arises where the employer and employee have been unable to reach agreement on such leave being taken.

In order for this notice to be legally valid & enforceable, the following requirements must be met:

  1. The employee notice must be in writing
  2. The employee must have more than 6 weeks’ annual leave that has accrued
  3. The notice must not result in the employee having an entitlement of less than 6 weeks’ annual leave (after this period of leave is taken)
  4. An employee must give at least 8 weeks’ notice of their intention to take the leave
  5. An employee cannot issue a notice to take more than 4 weeks’ leave in any 12-month period

It is important to note that this specific change relating to employee notices does not commence until 29 July 2017.

Annual leave in advance:

Certain awards and registered agreements allow an employee to take annual leave in advance. Prior to this occurring, the employer must agree in writing.

The agreement needs to:

  • be signed by both the employer and the employee
  • specify the amount of annual leave being taken in advance
  • specify the date that the leave will commence.

The employer must keep the agreement within the employee’s records.

In the event that an employee takes leave in advance and their employment ends before such leave has been re-accrued, the employer can deduct the amount still owing from their final payment.

Implications for businesses:

It is important that employers with Award reliant employees review and apply these changes to their enterprises to ensure compliance with workplace obligations. It is recommended that businesses also review & amend current annual leave policies and/or procedures to ensure compliance with the changes for Award reliant employees.

All Awards on the Pinnacle HR website have been updated to reflect these changes.

If members require any further assistance regarding the specific impact of the changes upon their organisation, Pinnacle HR can provide such assistance on 8232 2820 or via email

Please note this blog is for general guidance only. It does not constitute specific legal or HR advice in respect of the topics contained herein. Advice should be sought in relation to any specific individual matter or circumstances.