All you need to know about the changes to annual leave

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The Fair Work Commission (FWC) has released a series of changes following its four yearly review of modern awards.  These changes deal predominately with the issue of excessive annual leave accrued by employees. 


What changes were proposed?


The FWC agreed to insert model clauses into modern awards to include mechanisms to deal with excessive annual leave accrual, these are detailed below –


1.  Direction to employees to take paid annual leave (Excessive leave)


The FWC has decided that all modern awards should contain a model term dealing with excessive leave (defined as 8 weeks) which:

  • Gives employers the ability to direct employees to take excessive leave, provided the employee retains a balance of 6 weeks; and

Requires employers to first meet with the employee and genuinely try to agree on a plan to reduce or eliminate the excessive accrual.


2.  Cashing out of annual leave


The FWC has decided that all modern awards should include a cashing out provision subject to the following requirements:

  • A maximum of 2 weeks’ leave may be cashed out in any 12 month period;
  • An employee must retain a balance of at least 4 weeks leave after cashing out
  • The agreement must be in writing, signed and retained on employee records
  • It must be paid including leave loading if applicable
  • An employer does not have to agree to cash out the leave and nor can we use undue influence or pressure an employee to cash out their leave.

3.  Granting annual leave in advance


The FWC has decided that all modern awards should contain a model term allowing for the taking of annual leave in advance by agreement between the employee and employer with the employer having the right to make a deduction for any un-accrued leave from termination payments.


How will these proposed changes effect you as an Employer?


The FWC has invited interested parties to make further submissions on its proposed new excessive leave and annual leave terms.  Once this consultation process is complete, the FWC will issue orders which will flow these changes through to individual awards.


Once the new award terms take effect, they will provide welcome new flexibilities for employers in relation to award covered employees. We recommend that you review your annual leave policies and employment contracts as soon as possible and make any necessary amendments to ensure they are consistent with, and take full advantage of, these changes. Employers with existing enterprise agreements should carefully consider the relationship between any new award provisions and those agreements, before applying the new award provisions.


If you have any questions about the FWC’s decision or would like assistance with reviewing or updating your employment policies and contracts, or interpreting your enterprise agreements, please contact Blooming HR at


Once again, we’re here to add value to your organisation by supporting those who support the community.



Yours sincerely,

The Blooming HR Team


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