Business guide to Coronavirus

JobKeeper and annual leave: What you need to know

Many businesses have sought to reduce their annual leave liability by requiring employees who are on JobKeeper to take time off during the COVID-19 shutdown.

Changes have been made to the Fair Work Act to cover this contingency, but it’s been a source of contention between employers and employees and there are some grey areas. Australian Business Lawyers & Advisors Joe Murphy, Managing Director – National Workplace, shares some insights.

JobKeeper and annual leave: The new rules

Both employees and employers tend to be familiar with rules for taking and granting annual leave under normal conditions: both parties generally agree on when it should be taken. There are limited circumstances where employees can be told to have a holiday. For example, if they’ve accumulated more than eight weeks of leave, or if the business is shutting for a period, as many do each year between Christmas and New Year.

Under the Fair Work Act JobKeeper provisions, the rules are a little different. Businesses can request employees to take paid leave while they receive the JobKeeper payment. Employees must not unreasonably refuse a request, but they must be paid at their usual rate for the days or weeks they are on annual leave.

Eligible employees can also take annual leave at half pay for twice the length of time, provided it’s agreed in writing between the two parties.

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Ability to refuse

The legislation states an employee may not reasonably refuse a request to take leave, but that they must be allowed to keep a leave balance of at least two weeks.

The definition of ‘reasonable’ has been a bone of contention in a number of recent disputes which have come before the Fair Work Commission, Murphy notes. In May, a Village Roadshow Theme Parks employee sought to refuse a request to take annual leave and instead retain the bulk of her 9.3 weeks annual leave balance, on the grounds it was needed to cover several upcoming holidays for which she had not obtained formal approval. The commission disagreed, siding with the employer.

A part-time employee of the retail chain H&M met a similar fate, with the FWC finding she was acting unreasonably when she refused to agree to take annual leave and contended it was not her responsibility to support the company’s financial position by helping to reduce its contingent liabilities, and also on the basis that her salary was less than the JobKeeper payments.

Achieving an outcome that works

If there’s goodwill in the relationship, it should be possible to negotiate an outcome both parties can live with, without the need for arbitration, Murphy says. This can be easier for small business owners who know their employees personally than it is for large organisations which attempt to implement blanket leave policies.

“Ideally, you’ll strike a balance between treating everyone on the team the same and having some compassion and regard for individual circumstances,” says Murphy. 

Being transparent with your employees about your business’s financial position can put a request to take annual leave in context. While you might not want to dive deep into the nitty-gritty, sharing some specifics about the challenges and liabilities you face may help them understand why the request is necessary.

Support is more likely to be forthcoming if it’s clear sacrifices are being made by everyone from the owner down. “You need to demonstrate you care and are doing all you reasonably can within the scope of keeping the business afloat and ensuring they have a job when it’s all over,” Murphy explains.

Asking employees to use up their annual leave during the pandemic can be fraught. Managing the process thoughtfully and respectfully can keep your team engaged, on side and motivated to return after the crisis has passed.


Disclaimer: It is important to note this information does not represent legal advice and you should seek specific legal advice for your circumstances. We recommended Australian Business Lawyers & Advisors to help you find the right solutions for your business. 

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