EMPLOYERS STILL unaware of the changes made to the calculation of payment for accrued sick, carer’s and compassionate leave under new WorkChoices legislation may be in for a nasty surprise when they discover they may have underpaid staff for accrued leave entitlements
EMPLOYERS STILL unaware of the changes made to the calculation of payment for accrued sick, carer’s and compassionate leave under new WorkChoices legislation may be in for a nasty surprise when they discover they may have underpaid staff for accrued leave entitlements.
Changes introduced by the Australian Fair Pay and Conditions Standard involve a different method of calculation for payment of personal, carer’s and compassionate leave than for regular accrued annual leave, according to David Thompson, employment law partner at national law firm Hunt & Hunt.
This creates a potential financial and administrative minefield for employers.
Under the new regulations, the calculation of these leave payments is made on the basis of what the employee would reasonably have expected to have earned if he or she had worked during that period.
“What this means is that an employee has an entitlement to receive overtime payments, shift allowance and penalties if these would reasonably have been paid to the employee on the day(s) the leave was taken,” Thompson said.
“This has the potential to significantly increase the amount of leave payments owed, especially in workplaces where overtime, shift allowance and penalties are common.”
The new calculations could place an additional administrative burden on employers, according to Thompson, as each time an employee took personal, carer’s or compassionate leave, the employer must make an assessment of what the employee would reasonably have been paid for each day of leave taken had they worked instead.
To complicate matters further, the different calculation method only applies to leave accruing from 27 March 2006, being the date the WorkChoices legislation came into effect, whereas leave accrued before 27 March is calculated in the same manner as before.
“Employers would be wise to ensure that they set up separate systems of leave accrual and payment, for leave accrued prior to, and after 27 March, where the potential to pay more than base rates is an issue,” he said.
“Now that we are six months into the new regime, where leave under the new calculations may have been accrued, we are likely to see more cases where employees discover that they were potentially underpaid, unknowingly, by their employers. In that case, employers may be in for a nasty surprise.”
By contrast, the payment rule for accrued annual leave, however, remains simply that the employee must be paid no less than his or her basic periodic rate of pay.
