Leave Provisions are not as Straightforward as You Might Think

Leave Provisions are not as Straightforward as You Might Think

24/10/2019
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Employees are entitled numerous leave options making forecasting accurate leave provisions quite challenging. While most employers have a handle on standard leave entitlements, those falling outside of the norm can prove tricky if you are unfamiliar with national, state and territory labour legislation.

Leave can have a significant impact on cash flow if it is not calculated and accurately provided for. Although precise leave provisions are part of accounting and HR best practices, leave is not always predictable. Issues like Parental Leave and Leave Without Pay can catch organisations out. The right to exchange or ‘cash out’ annual leave for wages is another murky area regarding leave provision and cash flow.

iHR Australia offers expert hands-on support and guidance on leave policies and procedures that will ensure that your leave policies are brought up-to-date and also that you are updated on all legislative changes.

There are different types of leave and leave loadings

Both full time and casual employees qualify for various leave benefits subject to regular and unbroken service. Leave loading is an additional payment that individual employees may be entitled to while on annual leave. It is mostly capped at 17.5% over and above the regular wage and features in specific industry awards. Industry’s that pay leave loading include the hospitality, building and construction and manufacturing industries.

Leave entitlements include:

  • Annual Leave
  • Parental Leave
  • Personal/ Carer’s Leave
  • Leave Without Pay
  • Community Service Leave
  • Long Service Leave

Each leave category has terms and conditions that must be met by both the employer and the employee. Here is a brief outline:

Annual leave

All full-time and part time employees (on pro rata basis) are entitled to four weeks paid annual leave for every twelve months of completed service. Annual leave accrues every month. The entitlement increases to five weeks for employees who work regular shifts on public holidays and on Sundays in organisations that operate 24-hours a day throughout the year. Annual leave can be exchanged for wages subject to specific criteria. Employers also have the right to specify mandatory leave dates such as a ‘Christmas shutdown’ and decline leave as long as the reason can be suitably motivated. Paid annual leave provisions can be managed quite accurately.

Parental leave

Taking time to understand paternal leave is essential because it covers several leave options, including maternity, special maternity, paternity, adoption and concurrent parental leave. Employees qualify for paternal leave only after 12 months of regular, unbroken service immediately before the anticipated or actual date of birth or date of an adoption placement.

Also, parental leave can be extended to include unpaid leave for 52 consecutive weeks. The unpaid leave period can be further extended, at the request of the employee, for another 52 weeks immediately after the end of the previous unpaid parental leave period.

Legislation also makes provision for statutory paid parental leave for up to 18 weeks for female employees and two weeks paid leave under the Dad and Partner initiative. Parental leave provisions can be challenging to forecast.

Personal and Carer’s leave

Full-time employees qualify for ten days personal leave per annum. Personal leave covers personal injury and illness, including pregnancy-related ailments.

Full-time employees also qualify for ten days personal leave per annum if they have to take care of an immediate family member due to illness, injury or an unanticipated emergency. Both carer’s and personal leave provisions can be difficult to forecast.

Leave Without Pay

Apart from extending Parental Leave, employees can also apply for Leave Without Pay if they have exhausted all their other leave options. Legislation around Leave Without Pay is not clearly defined and is mostly dictated by internal employer policies and procedures. Leave provisions, and the impact of Leave Without Pay must be considered carefully when writing company policies and procedures.

Community Service Leave

Employees are eligible for community service leave if they are called for jury service, are qualified to deal with public emergencies or natural disasters, etc.

Long Service Leave

State and territory laws usually govern long service leave, and in most instances, employees qualify after ten years of unbroken service with a single employer. Leave provision for long service leave can be easily forecasted and managed.

Government legislation regarding leave

The Fair Work Act  comprehensively covers all aspects of employee leave entitlements and actively encourages employers to follow best practices when designing and implementing leave related HR policies and procedures and writing contracts of employment.

The National Employment Standards dictate minimum employee leave standards, and then state and territory legislation can also contribute. Employee leave can be complicated and difficult to understand. To avoid unnecessary confusion and potentially costly mistakes, it is best to partner with HR industry consultants.

Communicating leave provisions to staff

It is essential that all staff, full-time and casual, be informed of leave options that are available as well as the company’s leave policies. These details must be included in the contract of employment and also explained to new employees during their onboarding. They should also be advised who they can approach if they have any questions.

If there are any changes to leave policies, all staff must be advised as soon as possible. Payslips must also be regularly updated to reflect accrued leave and leave taken on an ongoing basis.

All leave applications must be submitted to and discussed with department managers who can approve or decline it if there are valid reasons. Management, however, might not always be familiar with leave policies and legislation, so they must have an open line to HR expertise. Management do not necessarily know if employees qualify for leave or have enough leave due as well. Administration of leave requests must be managed by HR for two reasons:

  1. HR keeps all employee records, including all leave applications, and therefore knows how much leave employees have accrued and taken.
  2. HR must have in-depth knowledge and a thorough understanding of the different types of leave and the specific conditions that apply.

DISCLAIMER: The contents do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such. You should seek legal advice or other professional advice in relation to any particular matters you or your organisation may have.

For more information in regards to state/territory’s leave entitlements, please visit FairWork for specific links.