Annual Leave Loading

[Stephanie1979]

We are currently negotiating a new agreement. We negotiated annual leave loading out of our previous agreements (back in 1998) and gave employees a higher hourly rate. In the current negotiations, the employees have requested that we reintroduce leave loading - something we are hesitant to do. Does any one have any information or can anyone point me in the direction of information which shows what % of companies still pay leave loading? or what sectors still pay? We are a manufacturing company in West Melbourne. I appreciate any assistance or guidance anyone can give me.

[Qld IR Consultant]

Stephanie, a couple of employers I have dealt with have done the same in the past. Negotiated the loading into the base rate and removed the leave loading. They however ensured that the agreement specifically stated that the base rate pay rates included the leave loading, and went on to ensure that the clause continued in subsequent agreements. I would suggest you will need to do some digging to see if the removal of the loading was documented back when it happened so you have evidence of such, and communicate to employees that this was what happened. I can only assume you have unions at the table so I would think they will push the claim if you are unable to provide evidence. Unfortunately just saying thats what happened won't be a good enough defence. Additionally, you will need to ensure that the base rates are correctly calculated and displayed in the agreement so you don't have BOOT issues with FWA......If all goes well make sure you have a explanatory note in the agreement, will save you the same trouble next agreement.....

[Stephanie1979]

Thanks for your response, it is very helpful. We do have the Union at the table and our agreements do all state that the leave loading was bought out. The employees (many of whom have been here for 20 - 30 yrs) remember the buy out, so that all works in our favour. Unfortunately, the Union is pushing the employees to have it reintroduced, something we, The Company, are not keen to do.

However, in good faith, if we do reintroduce it (yes, the BOOT is at the back of mind, I think we are treading a fine line with some employees) this then moves us on to the next point - will leave loading apply on all leave accrued up to the point of certification (ie: all leave accrued and not taken will have leave loading paid) or can we "corral"(sp.) the leave and only pay leave loading on leave accrued from the date of certification.......... I suppose that is the next negotiation point!

I have spoken to FWA and an Industry Body both of who don't have any stats for me but who both agree that leave loading is something that is still very much included in workplace agreements.

[Qld IR Consultant]

Well my position would be that if the union wants it reintroduced then thats fine, the base rates get lowered (remembering BOOT) and then the employees get the loading when they are on leave. What you can also do to stop the claim in its tracks is remind them that for the purposes of superannuation paid on ordinary time earnings that if their base rates have the loading removed then they will be getting paid less super....you don't pay super on leave loading.... If it goes ahead my position would be that it only applies to leave that is accrued after certification, certainly not at leave already accrued.

As a negotiation point you could "grandfather" the current employees by way of a clause stating that the leave loading only applies to leave accrued from certification date.

Sounds to me though that the union is not well skilled at the technical parts of agreement making given they seem to not realise that removing the loading from the base rate would disadvantage their members over time.....

[FWI]

Then the union could seek a take home pay order to prevent the reduction in the wages if they went down as a result of the loading re-introduction.

In relation to the leave loading, it will come down to the wording of the agreement and what the under pinning Modern Award provides as this is what the BOOT will be assessed against, and if the MA provides leave loading it will have a high likelihood of applying to the entire amount accrued as the loading applies to an amount of leave taken.

If you do get it endorsed then there will be a record keeping obligation to record leave for the different periods, and there will be nothing from preventing the employee requesting leave from the new entitlement. Then you will need to be ready to be able to prove it all to a Fair Work Inspector when each employee disputes the leave amounts on termination.

I think though FWA will take the liberal approach and not allow a split and permit a differentiation of the leave loading to ensure conformity with the intention of the Act. My advise will be to try and keep it out and prove to FWA that it was previously removed in lieu of a base wage increase.

[Qld IR Consultant]

I haven't seen a take home pay order yet that encompasses leave loading, especially in this sort of instance.....But the unions will try anything once......Like i said before, agree to take it out and dot point out the outcome if you do...I think they will soon change their minds, but don't do that unless you have a lot of documented evidence on hand....

[Sea Eagle]

Wouldn't the loading have to apply to all leave even pre certification, as that leave would also be affected by the reduction in the new hourly rate (less the loading rolled in) post certification?

I agree the Union here hasn't thought this one through. Perhaps their more "senior members" need to point out the super etc ramifications.