FWA accepts new leave arrangement

by 14 Dec 2011

In a significant decision that changes the interpretation of the National Employment Standards (NES), Fair Work Australia (FWA) has determined that so-called ‘loaded hourly rates’ in lieu of ‘paid’ annual and personal leave will be permitted in new Enterprise Agreements.

The landmark decision will have implications for employers in negotiating future agreement, and comes from the majority of a full bench of FWA.

The decision comes after an investigation in an agreement struck between a NSW painting contractor and his employer, who had agreed to incorporate its employees’ annual leave entitlements into higher hourly rates of pay.

Under the new terms, workers can request to be paid their annual leave entitlements in advance, by receiving it within an hourly loaded rate as the entitlement accrues each month— instead of when they take leave.

The decision is significant because all previous interpretations of 'paid' annual leave under the NES stipulated that the leave must only be paid at the time it was taken.

The new finding overturns an earlier FWA judgment that determined any such agreements would be in breach of the NES.

“The real difference between the conventional operation of the NES and the arrangement under this Agreement is the timing of payments. In our view there is no obligation in the NES to make a payment for annual leave at a particular time. … [W]e do not believe that the arrangement is inconsistent with the NES,” Vice President Graeme Watson said on behalf of the majority bench.

Commissioner Ian Cambridge opposed the decision, and found that the proposed loaded hourly rate breached the NES entitlement to paid annual leave.

Employers considering incorporating loaded hourly rates into Enterprise Agreements should seek professional advice and consult FWA for further details.


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