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Most modern awards have now been varied to include the new model terms for annual leave. The model terms were previously finalised in a decision of the FWC and provided for cashing out annual leave, leave in advance, annual leave payments and excessive leave.

On 29 July 2016 the full bench of the Fair Work Commission (“FWC”) published final determinations varying most modern awards to include the new model terms for annual leave. Most of the changes take effect from 29 July 2016. The determinations can be accessed on the FWC summary page. This note outlines the main elements of the model terms. Ensure you check your applicable award for the specific leave provisions that apply to your employees.

Cashing out annual leave

Most awards now allow employees to cash out annual leave, subject to the following safeguards that the employee:

  • Must have at least 4 weeks annual leave remaining after the cash out;
  • Cannot cash out more than 2 weeks in each 12 month period;
  • Has a signed written agreement with his or her employer;

Leave in advance

An employee may agree with his or her employer to take annual leave before it is accrued. The agreement must be in writing, signed by both employee/employer, and must specify the start date of the leave and how much leave is being taken in advance.

Excessive leave

Excess leave has been defined as 8 weeks of leave (or 10 weeks for a shiftworker). An employee may agree with the employer when to take leave. If they cannot agree, the employer can provide a written direction for the employee to take annual leave. The employer must give notice of at least 8 weeks (but not more than 12 months) of when the leave will start.  Specific rules apply about the length of the period of leave and how much of the leave must be remaining after the excess leave is taken.  Be sure to check your applicable award for the relevant rules.

Payment for annual leave

Many awards provided that annual leave must be paid before the employee starts their leave. The model terms provide that employer can continue to pay employees on leave by EFT under their ‘usual pay cycle’ whilst on leave. This removes requirements to pay employees upfront for their annual leave. This won’t apply where the employee is paid by cheque or cash.

Require further information/assistance?

The modern awards are accessible on the FWC modern awards list and will be varied to reflect the final determinations. If you require further information or advice, please contact your local Consultant at either our Adelaide or Melbourne offices.

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