The proposal to double leave for half pay – is it a good idea? How does it work?

The potential impact of the proposed changes is considerable, writes Scott Riches.

The potential impact of the proposed changes is considerable, writes Scott Riches. Photo: Getty

Last week the AFR reported that the ACTU and employer groups are close to reaching a consensus on introducing terms in modern awards that would allow employees to take twice as much annual leave, at half pay.

The changes, originally proposed by the Australian Industry Group (AiG) – an organisation that represents some of the country’s largest employers – have received significant support from unions appearing before the Fair Work Commission (FWC) in the current modern award review, which is considering if awards can be varied to better balance work and care obligations.

And it’s encouraging to see employer and employee representative groups potentially reaching agreement on reforms following what has been a tumultuous and often controversial period in Australian industrial relations over the past two years.

What would the changes mean?

The proposal is straightforward and, if accepted by the FWC, could mean that a person who would normally have four weeks of annual leave at a rate of $1500 per week, may instead take that leave over an eight-week period at a rate of $750 per week.

With details yet to be ironed out, the ACTU is proposing that any changes be safeguarded by requiring the initial request to take annual leave at half pay be made by the employee – presumably to protect them from being forced into an arrangement – and that requests not be unreasonably refused by the employer.

Since being elected in 2022, the Albanese government has introduced two major reform packages to the Fair Work Act, with the Secure Jobs, Better Pay amendments in 2022, and the Closing Loopholes amendments in 2023.

What is the modern award review?

In September Employment Minister Tony Burke wrote to FWC president Adam Hatcher to express an interest in “a targeted review of modern awards”.

Among the five matters that Burke suggested should form the bases of the review is an examination of the impact that current workplace settings are having on work and care, including consideration of award rostering arrangements.

Some of the focus in the review is aimed at addressing new gender equality laws. It means a key issue is also the potential for award changes to provide better access to employment that can be balanced with care responsibilities for workers in highly feminised sectors.

This is front and centre for several unions making submissions to the review.

Representatives for the Australian Nursing and Midwifery Federation, whose members were able to access a similar scheme during the COVID-19 pandemic, supported the proposed new changes to allow twice as much annual leave to be taken but at half pay,

They told the FWC those changes were “fundamental” and “a really effective means to managing work and life and the wellbeing of others”.

But wait, before I go on – what’s a modern award?

Before a major “modernisation” overhaul in 2010 modern awards were known simply as “awards” and provide minimum employment terms and conditions, like wages, hours of work, allowances, and loadings for about 2.66 million award-reliant employees according to FWC data.

But it doesn’t stop there, because the real impact of the award system reaches beyond the limit of those employees that rely directly upon it for their wages and conditions.

Affording some latitude for generalisation, the Australia system of workplace “instruments”, or legally enforceable documents (other than an employment contract), essentially looks like a pyramid.

The Fair Work Act sits on the bottom providing the widest coverage, applying to almost all Australian workers.

The next layer of the pyramid contains the modern awards, which provides more specific employment terms and conditions to workers in a wide range of industries and jobs, but to a smaller number of people than which is covered by the Fair Work Act.

The top layer, and capstone, is the one that contains enterprise agreements, which as the name suggests are agreements reached – with some exceptions – at the enterprise or individual business level.

They may rely on the award by incorporating it into the agreement, or they may stand alone. Sometimes they do a bit of both, and that’s OK too.

These cover a smaller number of people than the underlying award, with December 2023 data released by the Department of Employment and Workplace Relations that the 10,206 operative enterprise agreements covered about 2.2 million workers.

Either way, the applicable award remains relevant because the enterprise agreement must provide terms that are better than the award does overall.

The AiG remain opposed to the “reasonableness” test saying that employers should not be restrained by that requirement when refusing an employee’s request for annual leave at half pay.

Who would they affect?

Short answer – a lot of people.

The potential impact of the proposed changes is considerable.

The number of Australian workers directly affected by the modern awards is large, but the broad minimum fabric of employment conditions norms created by modern awards often reach out well beyond only those people that they legally apply to.

What I mean by that is that although there are many workers who don’t have enforceable legal rights that are provided by a modern award, the impact of the standards created by them tends to create moral norms – or conventions – which may then be adopted in workplaces more broadly.

Take penalty rates, for example. There would be few Australian workers that don’t recognise the concept of a higher rate, a “penalty” to their employer, for working outside ordinary hours.

But penalty rates aren’t provided for by the Fair Work Act, which applies to almost the entire Australian workforce.

The minimum threshold for penalty rates is provided by the various modern awards that apply to a worker’s industry or job.

The role of the Fair Work Act in this play is to give power to the Fair Work Commission to make and vary modern awards.

Submissions to the current work and care review are timetabled to close this Friday, April 26, with a decision expected in the coming months, but this is certainly one to watch for those trying to find ways to balance life’s competing priorities in a post-pandemic world.

Scott Riches is an employment lawyer and former union official. He is also director principal of Capacita 

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