The upcoming holiday season brings joy and celebration to everyone. It's a time when employees can take a much-needed break and spend quality time with loved ones.
However, it's important for employers to be aware of the regulations surrounding employee leave during Christmas business closures. In a recent review of Modern Awards, the Fair Work Commission made changes to the annual shutdown provisions. As an employer, you need to follow the new rules when handling employee leave during these closures.
In this blog, we'll shed light on the changes in legislation and provide insights on how employers can navigate this situation while ensuring fairness and compliance.
There are some tips for employees, too — so keep reading!
Understanding Employee Pay Categories
To start off, let's recap the three employee pay categories in Australia:
Permanent (full-time): These employees work a standard 38-hour week consistently throughout the year.
Permanent (part-time): These employees have regular weekly or fortnightly hours but less than 38 hours. Their work schedule may vary, such as someone working 5 hours a day, 3 days a week.
Casual: Casual employees do not have regular or guaranteed hours. Typically found in the hospitality and retail industries, their hours may vary from week to week.
Paid Annual Leave Entitlements:
Permanent employees, both full-time and part-time, are entitled to paid Annual Leave (holiday pay) each year. The general accrual rate is four weeks’ leave for full-time employees, while part-time employees accrue leave on a pro-rata basis. However, casual employees do not accrue any paid leave entitlements.
Annual Shutdown Provisions in Modern Awards
Before delving into the changes, it's essential to understand what annual shutdown provisions are. Annual shutdown refers to a temporary closure of a business during a specific period, typically around the Christmas and New Year holidays. It can also refer to a shutdown due to significant weather events, e.g. where there is flooding and employees and customers cannot get to a business premises.
Historically, permanent employees were required to use their annual leave during shutdown periods, and if they had insufficient leave available, the employer could force the employee to take unpaid leave.
The recent change in multiple Awards prohibits employers from forcing employees to take unpaid leave where there is any shortfall in available annual leave. You can check here to see if your Award is affected - https://www.fairwork.gov.au/newsroom/news/new-shutdown-rules-for-awards.
Changes to Annual Shutdown Provisions: What you need to know
In May 2023 significant changes to the annual shutdown provisions in Modern Awards came into effect. There are a few key changes that you need to be aware of:
1. Temporary Shutdown and Unpaid Leave:
With the new rules, employers are no longer allowed to force employees to take unpaid leave during a temporary shutdown. Instead, when employees decline to take unpaid leave, the following can occur:
the employer and employee can come to an agreement for the employee to take annual leave in advance (where the Award permits this). This agreement must be in writing, and an employee is under no obligation to agree to take annual leave in advance. Or,
the employer directs the employee to not attend work during the shutdown period and pays the employee’s wages as normal.
2. Notice Period:
Employers are now required to provide employees with at least 28 days’ written notice of the temporary shutdown period before directing them to take annual leave during the shutdown. The notice period will vary depending on the applicable Modern Award.
3. Reasonable Leave Request:
The new rules also outline that the requirement for employees to take annual leave during a shutdown must be reasonable. Employers are expected to consider the personal circumstances of their employees, such as existing leave balances and personal commitments when making these decisions.
To comply with these changes employers must review and update their policies and procedures regarding annual shutdowns. It is crucial to communicate the updated requirements and notice periods to employees, allowing them sufficient time to prepare for the shutdown period.
5. Disagreement Resolution:
The new provisions also introduce a process for resolving any disputes that may arise between employers and employees regarding the direction to take annual leave during a shutdown. This process aims to ensure fair and transparent resolution methods. It is important for both employers and employees to be aware of their rights and obligations during this process.
Rights of an Employer to Refuse Annual Leave Requests during the Year
The Fair Work Act of 2009 does allow employers to refuse annual leave requests by their employees during the year, but only if there are valid reasons. This includes situations where employees need to save enough leave for an annual shutdown, typically during the Christmas/New Year period.
According to the Fair Work Commission, most employees with at least six months of service will have enough accrued annual leave to cover a Christmas/New Year shutdown. However, employers need to clearly communicate their expectation of leave during this period to employees from the start of their employment, such as through employment contracts or workplace policies.
In simpler terms, employers can deny annual leave requests if it's necessary for employees to save up leave for a company shutdown, and most employees will have enough leave stored up after six months’ service. It's important for employers to communicate this expectation to employees right from the beginning. They must take proactive steps to plan their shutdowns properly and give employees sufficient notice.
Stay Compliant and Foster a Positive Work Culture!
Being aware of the changes to the annual shutdown provisions in Modern Awards is essential for both employers and employees in Australia. By fostering open communication and understanding, both employers and employees can navigate the annual shutdown period smoothly and maintain a positive work environment.
Employers should review and update their policies accordingly to ensure they are compliant with these new provisions. By assessing employees' available leave well in advance, employers can avoid unintentionally wanting their staff to take unpaid leave during the closure period.
Remember, your employees are your most valuable asset. By treating them fairly and adhering to the law, you'll not only meet your legal obligations but also foster a positive work culture where employees feel valued and motivated throughout the year.
Experience Bookkeeping Business Solutions
Discover how our professional bookkeeping services can help your business navigate the changes to annual shutdown provisions in Modern Awards. Contact us today to ensure your policies are up-to-date and help you maintain a positive work environment for you and your employees.
You can find further information about these changes here:
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