Disclaimer: On 13 August 2020, the High Court handed down a decision regarding the method of accruing personal/carer’s leave under the National Employment Standards. The High Court has found that the entitlement to 10 days of personal/carer’s leave is calculated based on an employee’s hours of work, not days, and should be calculated as 1/26th of an employee's ordinary hours of work in a year.
The High Court’s decision overturns the previous decision made by the Full Federal Court in August 2019. As such, this article should only be used as a historic reference. Employers should not be referring to this article to set up personal/carer's leave for their employees.
This article provides general information regarding changes to the interpretation of personal/carer's leave accrual under the National Employment Standards and details the new settings for the leave category as a result of these legislative changes.
If you are not subject to the National Employment Standards, then the decision does not affect you. If you are unsure whether this applies to you, we recommend you seek legal advice or get in contact with the relevant government authorities.
Background
On 21 August 2019, the Full Federal Court of Australia handed down a decision in Mondelez Australia Pty Ltd v AMWU. The decision deals with the method of accruing and taking paid personal/carer’s leave for the purposes of the National Employment Standards under the Fair Work Act 2009.
The Australian Government and the company involved in the case, Mondelez Australia Pty Ltd, applied to the High Court of Australia to appeal this decision. The High Court granted these applications on 13 December 2019. This means an appeal of the Mondelez decision will be heard by the High Court. In the meantime however, the decision made on 21 August 2019 is the current state of the law and applies to all affected employers and employees subject to the National Employment Standards.
What does this mean in basic terms?
The main highlights to take note of as a result of this decision is the following:
- Full-time and part-time employees are entitled to 10 working days of paid personal/carer’s leave for each year of employment;
- The leave must be calculated in working days, not hours. A working day is the portion of a 24 hour period that an employee would otherwise be working;
- An employee’s entitlement is expressly based upon time working for the employer and is expressly calculated in days;
- For every day of personal/carer’s leave taken, an employer deducts a day from the employee’s accrued leave balance. If an employee takes a part-day of leave, then an equivalent part-day is deducted from the employee’s accrued leave balance.
To be clear, the changes to personal/carer's leave accrual are applicable from the employee's start date. This is because the change is in regards to how the National Employment Standards is to be interpreted and not a variation to the actual entitlements that apply from a specific date.
Does this affect the existing Personal/Carer's Leave leave category settings?
Yes it does. The 2 main changes affecting the existing personal/carer's leave (PCL) settings are:
- The requirement to change the unit type from hourly to days: The existing PCL setting applies an hourly unit type. This is indicated via the accrual method (standard allowance).
- The method in how the leave entitlement accrues for all employees: Previously, PCL accrued per hour for every hour the employee worked. Now however, PCL accrues on any calendar day that could otherwise be a working day for the employee. The only instance where PCL does not accrue is on a day (or part day) that does not count as service, being unpaid leave.
For clarification purposes, when referring to the existing PCL settings in this article, we are referring to the system leave category set up by default when a business was created prior to 18 February 2020. Specifically, we're referring to these settings:
What are the new Personal/Carer's Leave leave category settings?
In order to cater for the new interpretation of how personal/carer's leave accrues, we have created a new leave category called "Personal/Carer's Leave (10 days)". The settings are as follows:
We draw your attention to the Leave Category Type for this leave category. We have created a new leave category type - Personal/Carer's Leave - which must be the category type selected to ensure the leave accrues as per the legislation. When this leave category type is selected, the following occurs:
- Employee leave balance = Tracked. This field is intentionally not editable to a user - the reason being that this leave type must be tracked to know the amount an employee has accrued and to also track what leave has been taken.
- Automatically Accrues = On an ongoing basis. This field is intentionally not editable to a user - the reason being that this leave type starts accruing from the employee's start date and there are also no requirements for capping the leave or limiting the amount of unused leave balance carried over from year to year.
- Standard Allowance. The system has a built-in standard allowance that, again, is intentionally not editable to a user. The standard allowance is set at 10 days per year and accrues at the rate of:
- 0.02739726 days per calendar day or part day of service for a non-leap year; and
- 0.0273224 days per calendar day or part day of service for a leap year.
N.B. Regarding the 2 different accrual rates (for non-leap year and leap year), you may come across scenario's where the pay run splits the accrual across both non-leap year and leap year rates. In the example below using a monthly pay run, the employee's start date (day of service) is 10/6. This means that the year of service for the employee finishes on 10/6, so the first 10 days of the (monthly) pay period is in a different service year to the last 20 days.
The service year at the start of the pay period is 11/6/19 to 10/6/20 which is 366 days as per the display (2020 is a leap year). The service year for the remainder of the month is 11/6/20 to 10/6/21 which is 365 days:
This new leave category will be added to existing businesses and will be available by default for all new business created, as per the information below.
Do we need to change our existing Personal/Carer's Leave leave category settings?
Yes - for existing businesses created prior to 18 February 2020. This includes businesses that have installed one or more pre-built Award. Refer below to the section "Will pre-built Award settings be updated?" for further information. Detailed instructions on converting hourly settings/balances to day based can be found here.
Any new business created from 18 February 2020 will have the new settings applied by default. As such, no manual changes will be required. Further information on the default new leave settings for new businesses created can be read in the Leave Categories and Leave Allowance Templates articles.
Will pre-built modern award leave settings be updated?
Yes they will. You will be notified when updates are available to be installed via the payroll dashboard.
In short, the Awards will include additional leave allowance templates against each employment agreement. Once the update is installed, you will only be required to change the leave allowance template assigned to an employee if their personal/carer's leave is to start accruing in days. For example, an employee may currently be assigned to a "Permanent NSW" leave allowance template - this template will retain the historic personal/carer's leave settings where leave accrues based on hours worked. If you want to update the employee's personal/carer's leave settings to reflect the current legislation you will simply need to assign the new leave allowance template, ie "Permanent NSW (10 PCL days)".
You can update employee leave allowance template settings individually via their Pay Run Defaults screen or alternatively do a bulk update using the employee export/import functionality.
Detailed instructions on updating employee leave settings for award employees can be found here.
How do we convert existing employees' Personal/Carer's Leave balance from hours to days?
Detailed instructions on converting hourly balances to days can be found here.
How do we migrate existing employees' Personal/Carer's Leave settings to the new settings?
The instructions regarding migrating to new settings form part of the instructions of how to convert existing balances to day units (ie the section above) and so are detailed in the same article as above.
Need further information?
You can refer to Fair Work's FAQ on this topic for further information.
If you have any feedback or questions, please send an email to support@yourpayroll.com.au.