High Court clarifies payment for personal leave

August 13, 2020
FCB Workplace Law

Today the High Court issued a keenly anticipated decision on how paid personal/carer’s leave is to be accrued and paid under the National Employment Standards (NES).

The Mondelez case concerned two employees who worked a roster that provided for an average of three shifts of 12 hours each to be worked in per week. In an earlier decision by a Full Court of the Federal Court of Australia, the court had held in effect that when a day of personal leave was taken the employee was entitled to be paid for the 12 hours work on the day,  but that would only count as one day out of the 10 days paid personal leave available to accrue each year. The result was that the employees would be entitled to accrue and take paid personal/carer’s leave of up to 120 hours in a year.

The High Court in a majority judgment has today overturned that decision and declared to this effect:

  • the NES provides for 10 days’ paid personal/carer’s leave to accrue each year of service;
  • 10 days means an amount of paid leave that is equivalent to an employee’s ordinary hours of work in a week in a fortnight or 1/26 of the ordinary hours of work in a year;
  • a ‘day’ is a ‘notional day’ and means 1/10 of the ordinary hours of work in the fortnight.

The High Court noted that patterns of work do not always follow a fortnight roster cycle, which is why paid personal leave can be calculated as 1/26 of an employee’s ordinary hours of work in a year.

As a simple example consider a full-time employee who works 1976 ordinary hours in a year [26 fortnights x 76 hours per fortnight].  1/26th of this is 76 hours paid personal/carer’s leave each year, and this is the amount of personal/carer’s leave that will be accrued for a year of service.

The effect of the decision

Employers should examine whether the High Court’s ruling on how personal/carer’s leave is calculated is consistent with payroll practice, or whether an adjustment may now be made.

Underpayment risks

If you are operating a payroll program that accrues or pays personal/carer’s leave in a way that differs to the High Court’s Mondelez it could result in an employee:

  1. accruing less personal/carer’s leave then they are entitled to or wrongly being refused paid personal/carer’s leave; or
  2. being paid the wrong amount when taking a period of paid personal/carer’s leave when absent from work.

FCB Group has a team of specialist lawyers and consultants who regularly provide advice on all aspects of employment, workplace relations, and industrial law and is ready to assist any business or individual. Also, FCB Group’s child companies, HR Assured and enableHR provide software solutions that correctly manage leave accruals

If your business is concerned with calculating personal leave payments to your employees, contact the team at FCB Group.

Michal Roucek is a Senior Associate at FCB Group. Michal’s experience extends across all aspects of employment relations and has worked with many clients from various industries including financial services, manufacturing, building and construction, human services including children’s services and educational services at all levels, pharmaceutical, real estate, healthcare, transport, logistics, recycling, correctional services and agricultural sectors.