Ensure employees don’t double-dip on leave entitlements

by Stephanie Zillman11 Sep 2013

Sending an employee on an overseas assignment can be a rewarding experience for both parties – employers can rest easy that a trusted employee is working on the overseas project, and employees stand to gain the knowledge and experience that international postings can offer.

Yet all too often employment relationships needlessly end because poorly executed overseas postings turn sour. One area in particular that frequently causes grief for employers is being unexpectedly slapped with a returned employee’s request for sick leave or annual leave, despite the employee not having been in the country for a period of time in order to accrue it.

For one employment law expert, a common problem is that employers get bogged down in the details of the move itself, instead of ensuring the home contract is legally put on ice. As an example, an employee could be assigned to a two-year posting in the UK, and legally request upon their return to redeem the annual leave that had accrued while they were away. In poorly planned contracts, this is something that can easily occur.

Yet it needn’t come to that, David Cross, partner Norton Rose, told HC. “If somebody was being assigned out of Australia on a secondment to the UK, you could validly bring about a situation where their Australian contract of employment would exist, but it would be in a state of suspended animation. Because the person isn’t rendering any kind of work for the employer in this country, they wouldn’t accrue annual leave or sick leave – things would just stop still for the period of time that they were away,” Cross said.

Another issue which has left many employers in the lurch is not factoring in the continued long-service leave entitlements that accrue whilst an employee is abroad on a secondment. Long service leave legislation differs from state to state, but as a case in point, under section 4, subsection 12 of the NSW Act, Cross said that the period of service spent working at a related overseas business is likely to be counted as a period of continued service. “Assuming [an employee had] been working abroad for a related business, although they haven’t been accruing annual leave or sick leave, when they come back they’ve got to be given credit for the period that they were away working for that related business for the purpose of assessing their eligibility for long service leave,” he said.

As an example, Cross said that an employee may have worked in Australia for five years before going to the UK for three years to work for the same company, then they return to Australia; they would be looked upon as having worked an eight year period of service. “They work here two more years and they hit the magic 10 years and qualify for long service leave.”

Key takeaway

It is imperative that HR applies just as much diligence to crafting the frozen Australian employment contract as is afforded to writing the overseas contract.

COMMENTS

  • by Karen Thomas 24/04/2013 3:51:13 PM

    So is the topic of sick and annual leave one that is decided upon by each individual business rather than an 'across the board' determination? I am a bit confused.

  • by Pat from Brisbane 11/09/2013 4:47:24 PM

    Hi Karen, for what it's worth in my view if the international assignment agreement or a variation of the local employment contract doesn't spell out that the contract is frozen for the duration of the absence, then the meter keeps ticking on Long Service, Annual and Personal Leave. A variation of the employment agreement should be able to freeze the Annual and Personal Leave entitlements but I would think the Long Service Leave would still need to follow the state legislation.

  • by Michael 6/05/2014 9:40:57 PM

    Hi There

    What would your thoughts be on the following situation regarding Long Service Leave.

    I have worked with the same employer for 9 years now. 8 years of this service was in NZ, and then I accepted a promotion which involved a transfer to Australia. This meant signing a new employment contract, however my original start date was preserved for all service related benefits. Naturally I assumed this included Long Service leave, however our HR team have stated that my service period for the reason of LSL only started from the date I signed the new agreement in Australia, however, as my start date remains September 2005, I still feel that my service should be at 9 years, not only 1. Any input or information much appreciated, Fair Work site only refers to start date as the basis for calculation of LSL entitlements.

    Many thanks
    Michael

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