Annual Leave Loading

[Jodiebee]

Hi Everyone,

Our organisation is considering absorbing the current leave loading entitlement into employee's base salaries. This will not disadvantage employees. I understand the need to clearly specify that leave loading is going to be reflected in the base salary and I understand the other responsibilities that we have regarding Modern Awards, communicating the change etc,

My question is what our rights as an employer are if an employee does not agree to the LL being built into their salary and insist on it continuing to be paid in the traditional way?

YOur valued advice would be welcomed.

Cheers
Jodie

[Qld IR Consultant]

Explain to them the add on benefits of it and clearly communicate the breakdown and you shouldn't have any issues. I've never had any trouble with any agreement where i've done that. The staff have always come out on top, its just making sure they understand it.

[Tiger]

Agree with Qld IR Consultant. I too have never had difficulty in removing it (have done it now at several organizations).
Best method for me was to work out current year's loading amount and add to their base salary effectively giving them a one off pay rise. This means super increases etc. - the unseen benefit.
The main point of course is that except for award covered employees, A/L/L is pretty much a thing of the past now. No company I've worked for since the early 2000s has paid A/L/L. It might or not? also be interesting for some employees to understand the origins of this loading to help them understand better why it is no longer paid.

One word of caution however. If your company has been in the practice of only paying A/L/L when employees take their leave (as opposed to simply paying out the annual amount of loading to them once per year at Xmas eg), you could have people with high A/L accruals thus loading which has also backed up and not yet paid. I would urge you to run a check on this first and pay out any back loading (up to the current year) due to employees BEFORE you roll the current year's loading into their base pay.
Tiger

[Jodiebee]

Thanks Tiger and Qld IR Consultant .. great advice.

Cheers, JB

[Greg Schmidt]

Hi Jodie,

It's worth keeping in mind that simply telling employees that their future salary will incorporate a "rolled in" Annual Leave Loading is NOT sufficient to overcome an entitlement to ALL set out in a Modern Award or Enterprise Agreement. The same applies even if an employer and employee agree that the Loading should be rolled in and sign a common law contract that says so. The contract or agreement cannot legally override an award entitlement. A pernickety Fair Work Inspector may decide that your organisation has underpaid employees their Annual Leave Loading entitlements even though you've been generous in paying increased salaries.

I'd suggest that you consider a new Enterprise Agreement (which changes the entitlement for all employees or a defined group of employees) or Individual Flexibility Agreements (which can change the way that the entitlement is paid - one employee at a time). An EBA would be a better solution because you might not get 100% coverage through Individual Flexibility Agreements, and they can also be cancelled on four weeks' notice.

The answer to your specific question is:

• if your organisation has an approved Enterprise Agreement that rolls the Leave Loading into wages - then an individual employee cannot object, because the majority decision rules; but
• if your organisation is still operating primarily under an Award or Agreement that provides an Annual Leave Loading entitlement - then an individual employee can refuse to sign an Individual Flexibility Agreement that rolls the Leave Loading in. You'd be obliged to keep paying as per the Award/EBA conditions until you make the employee an offer that he can't refuse.

Cheers,
Greg.