This is a new wrinkle of which Payroll needs to be aware.
In NSW, employers have traditionally adopted the position that
leave loading is not to be paid on any leave that is paid
out on termination, as opposed to leave actually taken during the
course of employment, because when leave is paid out it is
technically not "taken".
However, the Fair Work Ombudsman has recently reviewed
this issue and has concluded that the terms of the Fair Work Act
mean that leave loading must be paid when
accrued leave is paid out on termination of employment.
Furthermore, this is still the case even though some modern
awards specify that leave loading is not payable in those
circumstances because the Act 'trumps' the provisions of
Failure to pay leave loading would therefore be an underpayment
(and would have been so back to 2009, though as the amounts are
likely to be small and most ex-employees will not be aware of this
issue, the likelihood of back-claims is small).
Since FWO announced this position, several employer groups have
objected to this interpretation and the inconsistency with some
modern awards, and there have been further consultations regarding
dealing with this issue. As yet there has been no outcome from this
process, so the appropriate course for employers is to pay leave
loading on accrued annual leave paid out on termination of
employment, and keep an eye out for further information from FWO on
this issue. We will cover any change to this position in a future
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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