Employers have succeeded in persuading the Fair Work Commission to vary modern awards to include new provisions in relation to annual leave. These concern (i), being able to require employees to acquit excessive leave, (ii) cashing-out annual leave, (iii) the taking of annual leave in advance and (iv) EFT and the timing of annual leave payments. 

Of these changes, the first has the most import. Many employees have accumulated annual leave which is a growing liability on balance sheets across all industries and locations in Australia. The new provision, whose detail is still to be finalised, will provide a mechanism for employers to require employees to acquit excessive leave. FWC has indicated it will hear from interested parties about the final details of the new provision and whether or not it is to go into all modern awards. This will be dealt with this year.  

The other areas of change are useful too. Until this decision, the availability of the cashing-out of annual leave facility has not been automatic – it has required the inclusion in the relevant modern award (or enterprise agreement) of a specific clause permitting it, before it could apply. Many unions refused to agree to have it in the modern awards or agreements. Now that it will be standard in awards, it will be much harder for unions to block it in agreements.  

Being able to pay employees during their leave in the same way as the normal pay cycle, rather than in advance, assists payroll administration. At present, about 50 modern awards require the leave to be paid in advance. Provisions assisting parties to manage the administration of taking leave in advance already exist in some awards and this decision extends the facility to the remainder. 

It is important to appreciate that these changes apply only at the award level. If the workplace is covered by an enterprise agreement, these changes do not automatically flow on. The agreements will need to be updated to include these types of provisions before they can apply if there are not similar clauses included in the agreements already. However the inclusion of these changes in awards should make it easier to include in agreements in future in those workplaces where there has been opposition.

The Fair Work Commission is in the process of reviewing all modern awards. Some of the big ticket items include annual leave (see above story), penalty rates, casual employment, public holidays and more. 

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