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Take It Or Annual Leave It at Knox Taxation and Business Advisory in Boronia

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Time Out! Holidays, Public Holidays, Annual Leave & Annual Leave Cash-Out Policies.

(And we’re not talking sticking your card in the ATM)

Is your business pre-prepared?

At Knox Taxation and Business Advisory in Boronia, we’re always striving to keep you in the loop and up-to-date with all things – and not just about your tax!  This time we’re giving you the goss on how smart the Brownie movement slogan really is…

Holidays! Be they Public Holidays or Annual Leave, they can always be contentious, and a tad annoying as a Business Owner. One, there’s the cost to business, and two, the loss of productivity. And then there’s the legal entitlement clause for your employees. Mmmm… That being said, there are Employer Regulations that must be adhered to, and the rights that sometimes must be considered around ‘negotiating an agreement with your employees’. So here’s the latest from our HR Expert, Sheena Kane:


Annual Shut Down For Businesses

No matter how much you deny it, Christmas and the New Year are coming.  So, are you going to keep your business open, or close it over this time?

Many businesses find that, due to a general slowdown during the Christmas to New Year’s period, that, on balance, it’s a good time to shut the doors for a week or two.  This is quite legal, but ensuring that you then actually do the right thing legally by your employees is another matter.

The Fair Work Act (Cth) 2009 doesn’t actually give any direction with regard to Annual Shut Downs.  It gets duck-shoved to the Modern Awards to be able to make reasonable terms about directing employees to take Annual Leave.  Luckily, most do.  Unfortunately, these vary quite a bit.  Some will say you can only do an Annual Shut Down over the Christmas and New Year’s period.  Others will allow an Annual Shut Down for seasonal or other reasons.  Some Modern Awards will specify one month’s notice, and others require two month’s notice.  So do check your Modern Award, or Awards, to see what guidelines you must follow.

It’s usually a good idea for a company to have a policy regarding Annual Shut Downs, as there may be other variables for your business, such as:
• Will you shut down manufacturing and just keep a skeleton administrative and logistics crew working through?
• At what point will you decide the span of time to be taken off by your employees?
• When and how will affected employees expect to be told?

Discussing Annual Shut Downs during the initial employment interview process, and including it as a contractual term, can be useful too, as some potential employees can object to being told when to go on holidays.

Also, do consider what the case and agreement will be if an employee doesn’t have enough Paid Annual Leave up their sleeve to cover the shut-down period?  Your company may want to give Annual Leave Pay in advance (by agreement with both parties), or it just could be deemed Leave Without Pay.  Either way, communication about it between Employer and Employee must be clear.

Take Away Tip:  If you haven’t already notified your employees of an impending Annual Shut Down, particularly over the impending Christmas and New Year period, you’d be wise to do so soon.  Deciding what’s best for your employees and business should never be left to the last minute!

Annual Leave Cash-Out!  And a couple of other changes…

Employees covered by Modern Awards will finally, and legally, be able to cash-out accrued Annual Leave, following a determination recently from the Fair Work Commission.  However, there are a few rules around being able to do this:

  • It must be by genuine agreement between both parties
  • The agreement must be in writing and include how much Annual Leave is being cashed-out (e.g. weeks/days), plus the payment amount AND the date of payment
  • Cash-outs must be paid at the same rate as if the employee went on holidays
  • Cash-outs must retain at least 4 weeks of accrued Annual Leave in the bank, and
  • A maximum of 2 weeks per year is permitted to be cashed-out.

A new agreement must be made each time an employee cashes-out some Annual Leave, and this should be documented as part of their employment records file.   Although most Modern Awards have been varied to allow this, not all have!  Some of the more common Modern Awards that now allow the cashing-out of Annual Leave include the following:

  • Cleaning Services Award (2010)
  • Clerks – Private Sector Award (2010)
  • Electrical, Electronic and Communications Contracting Award (2010)
  • Graphic Arts, Printing and Publishing Award (2010)
  • Hair and Beauty Industry Award (2010)
  • Manufacturing and Associated Industries and Occupations Award (2010)
  • Nursery Award (2010)
  • Professional Employees Award (2010), and the
  • Security Services Industry Award (2010).

These Modern Awards also include a “Schedule” with a pro-forma, that allows a company to do what is legally required.

As an Employer, you may want to think about where you stand on the issue of cashing-out Annual Leave.  Some Employers will want their employees to take regular breaks to ensure that they are properly rested.  Other companies will relish the opportunity to get large Annual Leave Accruals off their books, OR have the opportunity to help out an employee with financial difficulties (without them needing to take out an unanticipated loan).

Another change to these Modern Awards is the ability for an Employer, and an employee, to agree to allow that the employee can have Paid Annual Leave in advance.  Again, some of the parameters around this are:

  • It must be by genuine agreement
  • The agreement must be in writing, and state:
    a) How much Annual Leave is being taken in advance, and
    b) What the start date is for this period of Annual Leave.
  • Records of these agreements must be kept on employee record files.

Again, there is a pro-forma agreement in the Schedules of the applicable Modern Awards.
Whilst Employers can deduct (from an employee’s final termination/exit of employment pay) any monies owing for Paid Annual Leave taken in advance and not accrued back, this may be of little use to you if your employee gives you one week’s notice, prior to leaving, where they owe you 4 weeks of Annual Leave.  As this is by agreement only, and there is the option of being able to allow (by discretion) Unpaid Annual Leave, then it may be safer to agree to Unpaid Annual Leave.

The third change to these Modern Awards is to allow the employee to be paid by EFT, as per the regular payroll, whilst on Annual Leave.  Technically, under most Modern Awards, an employee was supposed to be paid their Annual Leave in advance – before going on holidays.  This was a bit of a leftover from the old days, when employees used to be paid via cash or cheque, and likely needed that money to finance and survive through their holidays!

Help is at hand, however, if you need to draft or update your company’s Annual Leave Policy, and/or devise a pro-forma of an Annual Leave Agreement.  Maybe you just want to check you’re doing the right thing.  If so, Contact Knox Tax today, and they’ll put you in contact with me (at Kane Independent Consulting).

And lastly…

Public Holidays

Coming up this quarter:

• Melbourne Cup Day – Tuesday, 1st November, 2016
• Christmas Day – 25th December, 2016 (Tuesday, 27th December is a substituted Public Holiday – as Christmas Day falls on a Sunday this year)
• Boxing Day – 26th December, 2016.
(N.B. Permanent employees will be entitled to a paid day-off if the Public Holiday falls on a day on which they would normally work.)

So there you have it, some new pearls of wisdom, brought to you by Knox Tax. 

We’re good Scouts at Knox Taxation and Business Advisory – and we’re always here to help.
As they say in the Brownies – Be Prepared and Do Your Best so that nobody feels they have to ‘dib dib dib’ or ‘dob dob dob’ on you (okay the Scouts came up with that one!) to the Fair Work Commission.

Do be on you’re A-Game and make all communications clear when it comes to Annual Leave, Annual Leave Cash-Outs, Public Holidays and what’s to be deemed Leave Without Pay – BEFORE it becomes an issue at the very last minute when the day (or days) arrive. Happy employees make for a happier life, and less stress for you (within their entitlements of course).

Kind Regards,
Coral Page

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