Cashing out annual leave – is it a good option?
Last year submissions made to the Fair Work Commission are calling for greater provision be made in Modern Awards for more employees to be able to cash out their annual leave. The submissions were made as part of the Commission’s 4 yearly review of Modern Awards. The crux of the submissions regarding the cashing out of annual leave is that all Modern Awards contain provision for employees to cash out annual leave, provided that they retain at least 4 weeks. Now, the Fair Work Commission has released its Full Bench decision on changes to modern awards in relation to paid annual leave. The decision was issued as a part of a four yearly review of modern awards.
The cashing out of annual leave when initially raised concerns that employees will not take sufficient (if any) leave to allow them to de-stress, recharge and to do other important things like spending time with their families. The flipside, of course, is that employees who have a lot of leave owing can benefit from taking payment for annual leave whilst still earning wages.
Employers can also benefit from this flexible approach by not having to make do with less staff whilst someone is on leave but the flipside for them is the additional payment they will need to make to employees to cover cashed out leave.
As with anything, there are advantages and disadvantages but, when it comes to employee welfare (to the extent that it is impacted by not taking leave), is it worth taking the risk? There are, of course, additional workplace health and safety risks associated with fatigued employees, as well as the inevitable loss of productivity the business will suffer as a result.
Employees who aren’t sufficiently rested also tend to be less engaged on both an organisational and cultural level. There is, of course, the safeguard of keeping 4 weeks’ annual leave ‘in the bank’ but perhaps there should also be a limit on the number of weeks which can be cashed out in any particular year to ensure that employees are taking the majority of their leave over time?
The Full Bench however has approved the insertion of a standard clause relating to cashing out of annual leave, incorporating four safeguards into 120 modern awards:
- A maximum of two weeks’ paid annual leave can be cashed out in any 12 month period
- Specific requirements relating to record keeping and the content of any agreement relating to cashing out accrued annual leave
- If the employee is under 18 years of age the agreement to cash out a particular amount of accrued paid annual leave must be signed by the employee’s parent or guardian
- Notes are inserted at the end of the model term, which draw attention to the Fair Work Act’s general protections against undue employer influence and misrepresentation
Time will tell and show the take up and impact on employees if taken including their mental health!
At HR Business Direction we can assist with all your employee governance and compliance needs. Contact us here.
Leisa Messer BBus(HRM); GradDipIR; CAHRI; IRSQ
Managing Director | HR Strategist
leisa.messer@hrbd.com.au
07 3890 2066
www.hrbd.com.au
