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Business hurt by annual leave bank-ups

Recent changes to the way employers should handle excessive leave and cashing-out leave will assist businesses who are struggling to manage annual leave balances of long term employees. BMO Human Resources Advisor Alex Gee Kee urged employers to get up-to-speed with annual leave and long service leave requirements.

“Businesses that do not keep appropriate leave entitlements records risk facing nasty costs that could seriously affect cash flow.

Employers like the idea of squeezing a few more weeks work out of employees each year, and employees are enticed by the cash, but I’d encourage people to take the break instead.

Employees wanting to cash out leave can only do so if they retain a balance of four weeks leave, and, in most awards, they are only allowed to cash out up to two weeks per year.

Good businesses develop a culture that encourages employees to rest and recuperate during the year, otherwise it can lead to a fatigue issue and result in employee burn-out.”

Allowing leave to bank up can be a financial burden on the business.

“An accumulating annual leave balance isn’t going to get any smaller. Given that you can’t always predict when an employee is going to move on, these payouts can hit your business at a time when you have not budgeted for the cost. I have seen a business have to pay unused annual and long service leave when an employee left which equated to half a year’s salary.”

“The good news is that if an employee does have more than eight weeks leave accrued (or 10 if they are a shift worker), this is considered to be an “excessive” balance and it can be deemed “reasonable” for the employer to direct an employee to take annual leave if both parties aren’t unable to reach a mutual agreement.

Mr Gee Kee stressed that each situation and each award is different so those wanting to tidy up excessive leave balances, must seek advice from Fair Work or an HR expert to ensure they are following the rules.

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