Annual Leave to be paid upon termination of employment

Employment Law: 23 March 2019

The Fair Work Act's s90(2) provision governs payment of untaken annual leave when a worker's employment ends.

A full Federal Court has recently confirmed that annual leave owed to workers on termination of employment must be paid out at the same rate they would have received had they taken it while still working.

While s90(1) "creates the minimum standard" for ordinary hours worked, the bench said that s90(2) "is the rate at which the employee is paid when he or she takes annual leave, then that is the minimum amount that must be paid for any accrued untaken annual leave".

If a modern award or enterprise agreement provides for annual leave at a higher rate, then this is the rate that will be payable under s90(2) upon termination of employment, the bench confirmed.

This will create certainty for employers about what their obligations to their employees are upon the termination of employment for payment of annual leave.