Changes to the way businesses can deal with excessive leave

Yesterday, 11 June 2015, the Fair Work Commission considered submissions from various Industry Groups seeking a review of Modern Awards in relation to excessive leave, including provisions for dealing with excessive leave, cashing out annual leave, annual close downs and granting leave in advance.   Excessive leave can be a serious problem for business owners. Each year employees who don’t take some or all of their annual leave entitlement will continue to build their annual leave entitlement (year after year), not only does this become a debt for businesses but the debt grows significantly every time that employee’s wages increase.

Historically, cashing out annual leave has be frowned upon on the basis that it undermined the purpose of annual leave.  That is until the introduction of the Fair Work Act in 2009, which included a provision to allow employers and Award/EBA free employees to agree to cash out a component of annual leave, provided the employee maintains 4 weeks of annual leave.  However, employers of employees who are covered by a Modern Award or Enterprise Bargaining Agreement (EBA) would not have an automatic right to come to such an agreement unless the Award or EBA expressly allowed for it.

The proposed changes should help to iron out the inconsistency and confusion of dealing with excessive leave between Award/EBA employees and Award/EBA free employees.

Nevertheless, a process must be followed and documented when dealing with excessive leave for any employee.   It can only occur in certain circumstances, if an employee has a certain amount of accrued leave, and it must be agreed to.

If you are unsure what process you should follow to deal with excessive annual leave with your staff, give us a call on 1300 122 823 or chat with us right now using the online chat tool in the bottom right side of the screen. 

A summary of the ruling can be viewed by clicking this link https://www.fwc.gov.au/documents/sites/awardsmodernfouryr/common/2015FWCFB3406-summary.pdf

The model term (dealing with excessive leave) to be inserted into all Modern Awards, which will be subject to further submissions and a final decision, can be viewed by clicking this link: https://www.fwc.gov.au/documents/sites/awardsmodernfouryr/AM201447-Modelclause-excessiveleave.pdf

 

Independent Contractor v Employee…can you afford to get it wrong?

A small business has been fined $47,520 for failing to pay entitlements pursuant to a modern award, on the basis that workers were independent contractors.[1] The Federal Circuit Court of Australia also found the Director of that business guilty of sham contracting and personally fined the Director $9,504. The penalties imposed were in addition to an order to repay employee entitlements of over $18,000.

Too often businesses choose to engage contractors opposed to employing staff. It is usually a decision based on what is [seemingly] easier, less administration, more cost effective and “common” in the industry. However, simply paying tax invoices to a contractor with an ABN opposed to wages is not enough to deem someone to be a contractor rather than an employee. If you get this classification wrong, your business could find itself in the center of a Fair Work Ombudsman investigation facing serious penalties and an order to pay compensation to workers for unpaid entitlements. Read more