Metaphorically put your hand up if you shut down over the Christmas/New Year period?

Now, put your hand up if you ask employees to take unpaid leave over this period if they do not have sufficient annual leave?

I know 100% of you said yes to the second question. It’s standard practice, right?

Well not anymore. The Fair Work Commission (FWC) has recently reviewed the provisions of 78 of the modern Awards and decided to significantly vary the annual leave shutdown provision. This change is likely to have a huge impact on businesses and shifts a little more power in favour of the employee.

So, what does it mean and what do you need to do?

The Changes

As it currently stands, the shutdown or closedown provisions in modern Awards are designed to allow employers to direct their employees to take a period of annual leave during a particular period of shut down (i.e Christmas time). These provisions typically give an indication of how much notice should be given to the employee and allows employers to direct employees who do not have sufficient annual leave to take leave without pay.

As of 1 May 2023, the proposed model clause by the FWC will require employers to do the following;

  • Give employees 28 days of notice prior to the shutdown period;
  • For employees hired within 28 days of the shutdown period commencing, give written notice as soon as reasonably practicable after the employee is engaged; and
  • Only direct and employee to take a period of annual leave during the shutdown if it has been accrued (this direction must be reasonable and in writing)

If an employee has not accrued sufficient annual leave to cover the entire period of shutdown, the employer can no longer direct them to take leave without pay. Further to this, an employee can say no to unpaid leave, requiring the employer to allow them to work through the period of shut down or be paid for the period of shutdown.

It is important to note that an employer and employee may genuinely agree in writing for the employee to take a period of unpaid leave during the period of shutdown.

But, Why?

Great question, we don’t understand it either. In essence, the Fair Work Commission found that it is unfair for an employer to direct and employee to take a period of unpaid leave and that it is inconsistent with the Fair Work Act. They amount it to an unlawful standdown which has prompted the drastic changes.

How will this impact my business?

It is likely that throughout the year your leadership team will need to really consider whether or not they can accommodate employees leave requests. If someone wants 4 weeks off over winter to sip cocktails in Mykonos, will they have sufficient annual leave to cover any shutdown periods you have planned? The Fair Work Act allows an employer to refuse an employee’s annual leave request in the refusal is reasonable.

Additionally, you might reconsider any recruitment you had planned for September – December. Any new hires will not have accrued a sufficient annual leave balance to cover a planned Christmas/New Year shutdown period amounting to yet another cost to the business

In a perfect world, all employees will have a sufficient annual leave balance to cover these periods, but if not you may need to consider what work you do have for them to do over this period. If you’re put in a position where they must be paid, what can they be doing to earn this. Keeping in mind you cannot get them to perform anything outside of their capabilities or anything that puts their safety at risk, but surely there’s some admin, filing, cleaning to do, right?

Next steps

There are a few strategies we recommend to cater to these new rules coming into effect next month;

  • Conduct a compliance check on all of your positions to understand which (if any) Awards apply to your teams so that you can check the specific wording of the clause when it’s released. Important to note that you may have more than one Award that applies and they all may have slightly different clauses.
    • If your employees do not fall under a modern Award, you do not need to be concerned with these changes.
  • Amend any internal documents such as policies, handbook or employment contracts that direct employees to take a period of unpaid leave.
  • Have open, honest and transparent conversations with your teams about why the shut down is essential for the successful operation of your business.
  • For those employees that do not have sufficient annual leave, consider the option of them taking annual leave in advance. If this is an approach you take, please reach out so that we can help you draft a “claw back” clause for your contract of employment. We recommend waiting for the release of the clauses before committing to this approach to check that your specific clause allows for this.
  • Try and reach a mutual agreement with those employees with insufficient annual leave to take a period of unpaid leave and have this agreement documented in writing.

As always, any changes to the modern Award can seem daunting at first but HR Gurus are here to support you to achieve real and successful outcomes, no matter the changes so don’t hesitate to reach out to us at info@hrgurus.com for some assistance!

Written by HR Guru, Madeleine Bray.

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