Managing people

Do extra hours boost part-timer's leave balance?

If a part-time employee works extra hours, do these hours count towards leave accrual? Read on to get the answer.

In this scenario, a company employs a part-time employee who regularly works more hours than her contracted ordinary weekly hours of work. Their contracted hours are 24 per week. They’ve worked about 50 additional hours over the past year and been paid at the ordinary rate of pay.

The employee has questioned their accrued annual leave balance. The employee claims the additional hours should be taken into account to accrue annual leave. While not queried, this question is presumed to affect the accrual of personal/carer’s leave. The time and wage records show the accrual is based on the employee’s contracted ordinary work hours.

Would the hours worked by the employee in addition to their ordinary weekly hours count towards the accrual of annual leave and personal/carer’s leave? The employee is employed under the Pharmacy Industry Award 2010.

An employee’s ordinary hours determine the rate at which entitlement to annual leave and personal/carer’s leave accrues. This means the hours considered overtime by the applicable modern award (or enterprise agreement) do not count towards the accrual of leave under the National Employment Standards.

Whether additional hours worked by the employee are considered overtime or ordinary time will depend on the terms of the employee’s contract of employment, the applicable modern award or enterprise agreement.

The maximum standard of 38 hours per week (or a weekly average of 38 hours) puts a cap on the accrual of paid leave since ordinary hours, even under an averaging system, cannot exceed 38 per week (or 38 per week over a cycle). Additional hours are not included.

In this case, the Pharmacy Industry Award 2010 (cl. 12.11) provides that hours worked by a part-time employee in addition to the agreed weekly hours are considered casual employment and paid accordingly. This means that, in this case, the additional hours are NOT taken into account regarding the accrual of paid annual leave or paid personal/carer’s leave. 

Award/agreement-covered employees

As with the aforementioned Pharmacy Industry Award, it is important to refer to the applicable industrial instrument in determining whether additional hours worked by a part-time employee are considered overtime or ordinary time.

Some modern awards, such as the Children’s Services Award 2010 and the Social, Community, Home Care and Disability Services Award 2010, regarding additional hours, worked by a part-time employee as ordinary time (and would therefore count towards the accrual of annual leave and personal/carer’s leave), whereas the Clerks Private Sector Award 2010 (cl. 11.6) provides that all time worked more than the part-time employee’s ordinary hours will be over time (which does NOT count towards the accrual of annual leave and personal/carer’s leave). 

What is ‘service’?

An employee accrues paid annual leave and personal/carer’s leave based on continued service with an employer. The Fair Work Act (section 22) defines the meaning of the term “service” for accrual of leave.  

In calculating an employee’s accrual of annual leave, certain absences from work are excluded. All absences on paid leave (annual leave, personal/carer’s leave, long service leave, public holidays, jury service and compassionate leave) count as part of an employee’s service to accrue annual leave.

The following periods of absence do NOT count as service for accrual of annual leave:

  • any period of unauthorised leave, e.g. strike action
  • any period of unpaid leave or unpaid authorised leave (except community service leave or a period of stand-down)

For example, an employee does not accrue annual leave during a period of unpaid parental leave, or unpaid carer’s leave, or leave without pay. However, while an employee does not accrue annual leave during such absences, the absence does not break the continuity of service with the employer, meaning that prior service is maintained. 

Payment when taking leave

Under the National Employment Standards, leave is payable at an employee’s ‘base rate of pay. If an employee changes the basis of their employment, such as full-time to part-time, there is no loss of accrued leave, although the future accrual rate will be different, based on the employee’s new ordinary hours of work.

Reference should also be made to the applicable modern award or enterprise agreement to determine whether a different definition of ordinary pay applies.

For example, the Manufacturing and Associated Industries and Occupations Award 2010 (clause 41.4)provides that, for a period of annual leave, an employee is to be paid the wages they would have received in respect of ordinary hours the employee would have worked if not absent on annual leave.

This includes payment of relevant allowances and loadings and penalties paid for all purposes of the award. Personal/carer’s leave is paid at the employee’s base pay rate defined under the Fair Work Act.

The bottom line is that an employee accrues paid annual leave and personal/carer’s leave based on ordinary hours worked. Whether additional hours are ordinary or overtime is determined by the terms of an employee’s employment contract or the applicable modern award or enterprise agreement.

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