Payments of Accrued Annual Leave upon termination

Posted on 14 February 2014

A recent Court decision has provided clarity regarding whether payments of accrued annual leave upon termination are to include leave loading. In the case of Ryan v Whitehaven Coal Mining Pty Ltd, the Local Court of NSW held that an employer must pay an employee annual leave loading on termination of employment.

The Court analysed section 90(2) of the Fair Work Act 2009 (Cth) and decided that on termination an employee should be paid the amount they would have received had the employee taken annual leave during their employment. This means an employee covered by an award or agreement that prescribes the payment of annual leave loading must receive the loading as a lump sum payment on termination.

The impact of the Ryan decision could lead small business owners to financial hardship due to having to pay out leave loading that previously may not have been paid out to employees. It is for this reason that employers need to review their workplace agreements and modern awards to determine the exact cost of having to pay out leave loadings to employees on termination of employment.