We are sometimes asked if employees can be paid at a higher rate of pay for hours worked so that their employer does not need to pay the employee when they take periods of annual leave.
If the employee is casual, this situation cannot apply as casual employees are paid a higher loading and have no entitlement to paid annual leave. Therefore, we will focus on part-time and full-time employees in this blog.
Fair Work Act 2009 (Cth)
Part-time and full-time employees are entitled to be paid for any periods of annual leave regardless of their hourly rate in accordance with the Fair Work Act 2009 (Cth).
Re Canavan Building Pty Ltd [2014] FWCFB 3202
The 2014 decision by 5 members of the Fair Work Commission in Re Canavan Building expressed that ‘paid annual leave’ is a single term.
In effect, this decision banned a practice of paying annual leave in advance and said that pre-paid annual leave will not constitute ‘paid annual leave’. The employee would still be entitled to paid annual leave.
WorkPac Pty Ltd v Rossato [2020] FCAFC 84 (20 May 2020)
In the Federal Circuit and Family Court of Australia decision of WorkPac Pty Ltd v Rossato¹, Justice White commented:
… the FW Act does not contemplate there being a choice between the way employees are remunerated: by wage and provision of the specified leave entitlements or payment of an all‑in rate. The latter is permitted only in relation to casual employees.
Justice Bromberg, said:
… The timing of the payments that must be made is important. It is regulated and forms part of the entitlement: see ss 90(1), 99 and 106 of the FW Act. Generally, payment must accompany the leave.
Conclusion
Other than from cashing out provisions in accordance with any requirements in the applicable Award or Enterprise Agreement or the Fair Work Act 2009 (Cth) employers cannot ‘pre-pay’ annual leave as part of regular wage payments to employees.
If you need further assistance in understanding your obligations in relation to annual leave and your employees or any other leave concerns, please get in touch with us on (03)57224681.
MORGAN COUZENS LEGAL
¹WorkPac Pty Ltd v Rossato [2020] FCAFC 84 (20 May 2020), noting that the subsequent High Court decision (WorkPac Pty Ltd v Rossato [2021] HCA 23) determined that the employee was at all relevant times casual and did not address the question of whether casual loading amounts could be offset against an accrued paid annual leave entitlement.
If you would like to know more about leave entitlements, please read the below blogs:
I can’t get my employer to agree to me taking annual leave, what should I do?
