The Fair Work Commission has recently issued a decision that will allow most employees to cash out some of their annual leave entitlements, based on altering the terms of modern awards. These changes to modern awards take effect from the first pay period on or after 29 July 2016.

The changes currently apply to 112 modern awards, although the Commission is considering whether other awards should be similarly amended. Annual leave can only be cashed out when allowed under an award or enterprise agreement, or as permitted by the Fair Work Act 2009 for employees that are not covered by an award or enterprise agreement.

Employers and employees need to strictly comply with the provisions of the applicable award or enterprise agreement and the Fair Work Act 2009 when cashing out annual leave. Common requirements for cashing out annual leave now include the following:

• An employee must still have an entitlement to at least 4 weeks’ annual leave after cashing out;

• There must be an agreement in writing between the employer and employee each time annual leave is cashed out;

• A maximum of two weeks’ annual leave may be cashed out per year an employee covered by an award;

•  The employee can't be coerced or pressured by an employer to cash out annual leave; and

• The employee must be paid at least the same amount for cashed out annual leave as they would if they had actually taken the leave.

If you need assistance with calculating leave entitlements, understanding awards, enterprise agreements or any other workplace matter, please do not hesitate to contact:

Louise Houlihan
Principal
Sladen Legal
T: 03 9611 0144
E: lhoulihan@sladen.com.au

Jane McKay
Senior Associate
Sladen Legal
T: 03 9611 0155
E: jmckay@sladen.com.au