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Remove fuss and fuzz from employment leave entitlements

Australian employment law is a complex matrix, even for lawyers specialising in the area. Core employment law concepts, such as "leave entitlements" have been given new meanings since 2005 by Work Choices legislation.

While this is a difficult and dry topic, it has first rank practical implications for workplace morale and the long term financial wellbeing of employers and employees.

More than ever employment legislation uses a fuzzy and fussy drafting style. You see that in the changed meaning of long-standing legal concepts such as "leave entitlements", "employee", "independent contractor" and "agreement". The change is due to employment legislation, including Work Choices and the Independent Contractors Act 2006 (Cth).

1.  Why is compliance with leave entitlements a priority?

We are discussing concrete or practical needs here. Leave entitlements raise day to day concerns for all businesses and their employees. They affect morale. They have flow-on affects for adjustments to salaries, superannuation, and entitlement payments. Further, they trigger necessary compliance notices and mandatory record keeping requirements.

Any of these issues can become a problem in a compliance audit, business restructuring, retrenchment or employee termination.

New frontiers are arising. New patterns in work raise novel questions, eg what are the leave entitlements for people working part-time from home, teleworking or work across several jurisdictions (eg half the year in Melbourne and half the year in Sydney)?

2.  What are the minimum leave entitlements?

In general terms the legal position of employers can be stated confidently. Employers need to determine which leave obligations affect them and they must keep records of leave entitlements and reflect them in their human resources processes, procedures, employment law documents, forms and payments.

Generally, only permanent employees enjoy all leave entitlements and part-time permanent employees have a right to leave on a pro rata basis (eg the employee who works 20 hours per week may have a right to half the entitlement of a 40-hour full-time employee).

Employees are eligible to receive the minimum leave entitlements set out in the Australian Fair Pay and Conditions Standard ("Standard"). Briefly they include:

  • a maximum of 38 ordinary hours of work per week;
  • four weeks of paid annual leave (with an additional week for shift workers);
  • 10 days of paid personal/carer's leave (including sick leave and carer's leave), with provision for an additional two days of unpaid carer's leave per occasion and an additional two days of paid compassionate leave per occasion; and
  • 52 weeks of unpaid parental leave (including maternity, paternity and adoption leave).

3.  My MYOB is up-to-date why should I care!

The challenge arises when you need to work out employee-specific leave entitlements. You must work out the entitlements before you can record or reflect them in an individual employer's human resources management system.

The problems that can arise can be illustrated in the context of even a simple HR system. It involves at least:

  • employment agreements (leave aside whether they are oral or written),
  • an accounting program or bookkeeping system, and
  • some employment forms or notices, to collect and give information.

While a recent release of MYOB or a comparable computer accounting program might be updated for Workmyob_premier-enterprise Choices legislation, it can't stop the entry of false or inadequate data.

The point of data collection is often the problem. A humble one page Leave Application Form can be deceptive and disarming. It may look OK until you check its fields for employment law compliance. Many we consider are incomplete and to that extent are inconsistent with the law or even in-house contracts or policy.

While lawyers are trained to pour over contracts they often fail to produce or check forms or policies. Obviously forms should reflect design decisions based on detailed rules in law or a policy manual, employment contract or workplace agreement.

Don't ignore to check forms. Check leave application forms and related forms for compliance and to avoid the garbage in, garbage out syndrome.

In summary, to record or reflect leave entitlements in a compliant HR system, customisation is needed for all parts of the HR system of an individual employer.

4.  What information is needed to develop a solution?

To properly work out leave entitlements the first task is to situate each employer, and each of its employees, in the matrix that is employment law. Gather information for legal advisers on four categories of information which are particularly important:

  • Law, ie which law applies for the employee? For example, legislation, workplace or enterprise agreements, common law, awards etc; there is also an added requirement in some cases to consider transition between existing to future arrangements.
  • Location, ie what legal jurisdiction(s) are relevant to each employee. For example, which state(s) in Australia.
  • Employee - what is the nature of employment of each employee? For example, permanent full-time, non-permanent full-time (eg fixed term or special project employees), permanent part-time (eg working from work or teleworkers), non-permanent part-time, casual, contracted labour hire workers and pieceworkers. Adding complexity, one category of employment law legislation deems certain workers to be independent contractors when they would otherwise be employees (or visa versa).
  • Leave - what type of leave is relevant to each employee? For example, sick leave, maternity leave, annual leave, compassionate leave, long service leave, or jury leave.

Drilling down on that last bullet point, there's a second order of tasks for advisers to assess for each category of leave. They include:

  • the duration of leave,
  • whether it is cumulative year after year,
  • whether it is paid leave or unpaid leave, and
  • when and what type of leave notice and documentary evidence an employee must provide on, before or "as soon as reasonably practicable", to quote Work Choices.

5.  Can an employer customise leave entitlement policies?

blacktownworkersclubYes. The case of Tate v Blacktown Workers Club Ltd [2007] AIRC 581 illustrates the power of customisation.  In the case the Australian Industrial Relations Commission accepted the immediate dismissal of an employee under a leave policy. The dismissal was held to be not harsh, unjust or unreasonable.

The employer, the Blacktown Workers Club, had a longstanding policy the effect of which was that annual leave, long service leave or unpaid leave would not be granted to any employee for the month of December due to it being a peak trading period. An employee, a doorman at the Club, went to England in November 2006. In December he took sick leave while still in England. He produced a medical certificate from a doctor in England citing anxiety and depression. It was prepared three days before he was due to return to work. The employee’s airline ticket was issued in August 2006 and had a return date of 5 January 2007.6.

What does the solution look like?

The end game for employers is to work with internal staff and external advisers (as needed) to record and reflect legal positions in a human resources management system. As  discussed, that system includes an accounting or bookkeeping system together with up-to-date contracts, agreements, template letters and forms.

Our solution involves three "packages". They are overviewed in the table in What every business should know about common law employment contracts. They provide an integrated legal and managerial framework for human resources legal and management documents, including for leave entitlements.


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