Paying out unused annual leave

 
The National Employment Standards (NES) state for each year of service with an employer (other than periods of employment as a casual employee), an employee is entitled to four weeks of paid annual leave and five weeks of paid annual leave for shift workers. The Nurses Award 2020 prescribes an additional week of annual leave for employees covered by this Award. 

Division 6, Section 87 under the NES states an employee’s entitlement to paid annual leave accrues progressively during a year of service according to the employee’s ordinary hours of work, and accumulates from year to year. This does not accrue during a period of casual employment with an employer. 

When employment ends, employers have an obligation to pay their employees any unused annual leave they have accumulated during their period of employment. The annual leave payment has to be the same amount the employee would have normally received if they’d taken the annual leave during their employment. 

For example, if an employee would have been entitled to annual leave loading or other payments when they took their annual leave, these loadings and other payments need to be included in their final payment. As seen in the case below, serious consequences will apply if employers do not pay their employees their entitlements as part of their final pay.

A recent case investigated by the Fair Work Commission saw two ex-employees claiming their former employers had failed to pay their accrued, but untaken, annual leave entitlement when their employment ended in early 2021. It was found the workers were owed over a combined total of 400 hours of annual leave entitlements under the NES.

After failing to comply with a Compliance Notice issued by the Fair Work Ombudsman that required the company to back-pay their workers entitlements, the company now faces a court hearing. They are looking at a maximum penalty of up to $33,300, as well as an order for the company to comply with the Compliance Notice and rectify any underpayments in full, plus interest and superannuation. 

You can contact us via phone (07) 3872 2222 and email support workplacerelations@amaq.com.au