If you are terminating a worker’s employment, leave considerations can become critical. Paying out annual leave or long service leave can be costly. In addition, an employee might have taken sick leave when they should have taken annual leave. Nevertheless, employers must pay out annual leave when they terminate an employee. This article explains whether you can reclassify leave after termination.
What Are Leave Entitlements?
All employees except casual employees must receive leave entitlements through the Fair Work Act and the National Employment Standards (NES). An example of leave entitlements is annual leave and sick leave.
Annual Leave
Annual leave is holiday pay and allows all employees to have paid time off. Full-time employees receive four weeks of annual leave every year. Part-time employees receive yearly leave on a pro-rata basis.
When the employment relationship ends, you must pay the employee their unused annual leave. The annual leave payment must equate to how much they would have earned if they took the leave whilst employed.
Sick Leave
Sick leave is for employees who are ill or injured. Full-time employees get 10 days, whilst part-time employees receive sick leave on pro rata. Notably, employers can require proof of sickness.
The Fair Work Act states an employee must give evidence that would satisfy a reasonable person that they are suffering from a personal illness or injury or caring for an ill family member. For example, an employer might request a medical certificate. However, only some awards or agreements require employees to give evidence of their sickness.
Can You Reclassify Leave?
If an employee is sick whilst on annual leave, they can request that their sick leave entitlement be used for this period instead of their annual leave. Notably, you cannot direct an employee to take sick leave during this period. However, you can still request evidence of their illness.
However, an employee cannot typically reclassify leave upon termination of employment. Consider the following case.
Although the Court will consider whether an employee is entitled to sick leave, generally, they will not allow reclassification of leave. Annual and sick leave is granted for two different reasons. However, Foulsham was covered by an Award, suggesting that this determination could have a different effect on employees who are not.
Continue reading this article below the formHow To Protect Your Business
As an employer, you must require your employees to comply with the procedures you set out when employees take sick and annual leave. For example, you can protect your business in the long run by requiring employees to provide medical certificates soon after they return from sick leave.
In addition, consider directing your employees to use their annual leave within a certain period or after a certain amount of accrual. This requirement means that you will allocate sick or annual leave when appropriate, and you will avoid paying out a considerable amount of annual leave on termination.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
Key Takeaways
Under the Fair Work Act and National Employment Standards, employees receive leave entitlements such as annual and sick leave. Leave can be reclassified during employment, such as if you are ill during your annual leave. However, once termination of employment, leave cannot be reclassified unless the Award or agreement says otherwise. Therefore, you must pay out your employee’s annual leave when terminated.
If you need help understanding your procedures for when an employee leaves, our experienced employment lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Employees receive annual, parental leave, long service, community service, and sick and carer’s leave.
Unless the Award or agreement specifies otherwise, you cannot reclassify leave after termination. For example, employees can use their sick leave entitlements if they are ill whilst on annual leave.
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