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High Court clarifies the correct method for calculating leave

Personal/carer’s leave must now be ‘calculated by reference to an employee’s ordinary hours of work’, reverting to the method of calculation prior to August 2019.

On 13 August 2020, the High Court of Australia changed how paid personal/carer’s leave under the National Employment Standards is to be accrued (see Mondelez Australia Pty Ltd v AMWU & Ors [2020] HCA 29). This overturns the Full Federal Court ruling in August 2019, which held that 10 days of paid personal/carer’s leave would be provided to permanent employees regardless of hours worked.

The High Court found that the entitlement to 10 days of paid personal/carer’s leave under the Fair Work Act 2009 (Cth) (Fair Work Act) is accrued in hours rather than days worked. Under the previous ‘working day’ method of accrual, part-time employees would be entitled to the same or more leave than full-time employees. The example given by the Court was that ‘a part-time employee working one day per week for 7.6 hours would be entitled to ten days of paid personal/carer’s leave per annum’ which would be ‘the same as an employee working 7.6 hours five days a week’.

What should employers do?

Employers should review employees’ leave to ensure the correct amount is being accrued and paid. When calculating 10 days of paid personal/carer’s leave, leave would be calculated as 1/26 of an employee’s ordinary hours of work in a year (representing 2 weeks of leave out of the 52 weeks in a year).

This is especially important for employers who have changed their personal/carer’s leave accrual following the Full Federal Court ruling in August 2019.

Related: “This could force parents out of their jobs”

In addition, employers should inform employees about the change to personal/carer’s leave accrual. Even if employers did not change their leave calculations following August 2019, they should still notify employees and clear up any confusion.

What could this change in leave mean for the future of work?

These changes recognise and encourage flexible working arrangements.

The majority of the High Court rejected the interpretation of ‘working day’ as a ‘24 hour period that would otherwise be allotted to work’. Instead, the Court described a working day as a notional day consisting of 1/10 of an employee’s ordinary hours of work in a fortnight.

The Court also noted that calculating leave by ‘working days’ would not encourage the flexible working arrangements that the Fair Work Act seeks to promote. ‘It would discourage an employer from employing anyone other than one person working a five-day working week, rather than employing a number of people over the course of that week, thereby avoiding employing a number of employees each being entitled to ten days of paid personal/carer’s leave per annum’.

These changes reflect the future of work. Calculating leave accrual through hours rather than days is due to ‘the fact that patterns of work or distribution of hours do not always follow two-week cycles’.

‘It would not be consistent with assisting employees to balance their work and family responsibilities if the only working arrangement on offer was a five-day working week’.

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Ann Wen

Ann Wen

Ann is a journalist at Dynamic Business.

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