My company is currently implementing a new leave policy. The intention is to combine sick and annual leave into one general leave, and allowing employees to take a set number of days off a year unannounced (5-10) and with no medical certificate, with the remaining requiring at least two weeks notice. Any unannounced leave beyond these days will require a medical certificate, and if there is insufficient leave accrued, it will be leave without pay.

I'm wondering if anyone has seen a leave policy similar to this before, or can foresee any significant issues that may arise.

I'm in Sydney, Australia

EDIT: We've settled on a leave policy which gives employees 30 days of general leave a year, with a 20% loading if at least 2 weeks notice is given.

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    IANAL - but I'm not sure how this jives with Fair Work in Australia: fairwork.gov.au/leave - there's clear delineation between sick and annual leave entitlements - unless there's some clause allowing this in a "registered" agreement. – HorusKol Mar 6 '16 at 23:08
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    That last line makes it sound like you're soliciting opinions instead of trying to solve a real problem, which makes this more suited to a forum than a Q&A site (VTC). – Lilienthal Mar 7 '16 at 7:41
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    In most of europe that would be flat out illegal, since unlimited paid sick leave days are mandated. If you're sick and you can show a note for it - you continue to get paid, 3 or 100 days a year. – Magisch Mar 7 '16 at 11:43

Employee Entitlements

Minimum leave entitlements within Australia are set out in the NES (Nintendo Entertainment System National Employment Standards). These include:

  • 20 days paid annual leave (if employed full-time; or a proportionally equivalent amount if employed part-time).
  • 10 days of paid sick/carer's leave each year (if full-time; as above).
  • 2 days of paid compassionate leave each time a relative dies or "suffers a life-threatening illness or injury".
  • 2 days unpaid carer's leave each time a family/household member requires support.
  • 12 months unpaid parental leave (note that separate legislation also allows for paid parental leave on top of this).

Both annual leave and sick leave roll over from year to year (if you have unused balances remaining at the end of the year). In certain situations, an employer can direct an employee to take a portion of their annual leave, or can pay out a portion of the balance outright if a significant amount has accrued.

Note that if your employment is covered by a Modern Award (which it probably is, unless you are working in a heavily-unionized industry), then you should also check the Award agreement that pertains to your industry as it may provide slightly different (though generally, more generous) entitlements than the minimum that the NES calls for.

Or, if you are in a heavily-unionized industry, then your employment terms may be set out in an Enterprise Agreement. You'd probably know if this applies to you or not (your employment contract should clearly indicate which situation applies).

If your employment falls under an Award contract, you are free to make limited variations to the terms provided that:

  1. Both the employee and the employer agree to the change; and
  2. The change passes a "better off overall" test (i.e. the change can't result in the employee having fewer entitlements than the award guarantees).

Notably, the way that leave accrues is not something that can be varied.

Possible Issues

Based on the above, and assuming that you're not on an Enterprise Agreement, there are some possible issues:

  1. Australian employment law doesn't allow employers to unilaterally vary the terms of employment for their employees. The variation needs to be agreed to by each employee the change applies to.
  2. The functioning of leave isn't something that employers are generally permitted to vary, in any case.
  3. If the general pool of leave accrues 20 days/year instead of 30 days/year, then the policy is basically shortchanging on leave entitlements.
  4. If leave days are treated generally, employees who don't get sick often may take longer holidays and resignations/terminations may cost more in terms of paying out accrued entitlements (normally only annual leave is paid out when employment ends; but if you have everything in a single pool you'll have to pay out the whole thing).

The first two items are probably irrelevant, as from a certain perspective what the policy actually changes is the accounting of leave days, but not any of the underlying mechanics of how the leave system operates.

What matters is that full-time employees accrue 20 days of annual leave and 10 days of sick leave for each year of employment. If this is treated as having 30 days of "general" leave that employees accrue each year, it seems like that would be fine (in my opinion, at least), so long as nobody is kept from accessing their full leave entitlements.

And the fourth item actually benefits employees, so shouldn't be an issue as long as there are funds there to cover the increased amount of entitlements being paid out. If anything, it can be a point of differentiation to make the company more appealing to prospective hires (if you don't get sick often, you get more general leave days to use for your holidays).

So the third item is the only real sticking point. And there's not enough information provided in the question to know if there's an issue or not.

Is the policy proposing that employees will accrue 30 "general" leave days each year? If so, nothing to worry about.

Or does it propose an accrual of 20, basically replacing 10 annual leave days with sick days? That would be an underpayment of entitlements, which won't fly. Employees would likely complain, and if the policy wasn't promptly changed might take the matter to the Fair Work Ombudsman.

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    Thanks for that, exactly what I was looking for. What we've ended up doing is to provide 30 days of general leave per year, with a 20% loading if at least 2 weeks notice is given. The leave will accrue and roll over as per usual. – roffster Mar 7 '16 at 22:02

I think one issue for an employee is accrual - typically, for an employee:

  • Sick leave carries over into the new year, and has no limit for accumulation (normal caveats apply for medical certificate requirements, etc). However, sick leave is not included in final payment calculations when leaving the job. A lot of employees prefer to conserve sick leave for "rainy days" - such as recovery from surgery. Many others prefer to just spend it as fast they accrue (and others don't have a choice, and require sick leave for frequent events like migraines, or other things).

  • Annual leave is typically limited in the amount of carry over each year (as laid out in your work agreement or award). However, it is also included in calculations when resigning or in case of redundancy.

You need to check over exactly how this combined leave entitlement impacts on current accumulation.

I'd also talk to the people at Fair Work - https://www.fairwork.gov.au/ - who will be able to provide much more information on the ins and outs.

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    +1 I have not seen this here either, and I'd definitely be checking the validity of it through Fair Work. – Jane S Mar 6 '16 at 23:57
  • I think I'll draft up a policy and and send it to Fair Work for review. I'll update this if I hear back, but for now I'll leave it open so other people can comment if they know anything. – roffster Mar 7 '16 at 1:36
  • I doubt it would fly with FairWork for annual leave to not carry over to the next year, unless the mechanism by which it failed to carry over was that the employer paid out cash for the excess amount. Otherwise it's basically underpayment of wages/entitlements under Australian law. – aroth Mar 7 '16 at 5:46
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    @JoeStrazzere - Yes, it's the law in Australia. – aroth Mar 7 '16 at 12:48
  • Thanks @aroth - wasn't sure if it was the law or if it was just common custom – HorusKol Mar 7 '16 at 21:38

I've worked at several companies that had PTO (paid time off policies) with similar features. They combined vacation and sick days into a single lump (typically the lumps would equal the total of such days that competing companies offered).

But I've never worked at a company that separated "unannounced" versus "two weeks notice" days. Perhaps this is something locale-specific (I've not seen this in the US). In my companies, you were expected to work with you manager to schedule any vacation time. In practice, the scheduling was never really an issue.

In my case, the "issues" tended to involve folks who didn't save any PTO days for the end of the year, then ended up needing some time off. They were never happy having to take the days off without pay.

I tended to like it, because I almost never take a sick day off. So I basically got more vacation days in the deal.

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    I've not heard of this in Australia before - there are minor variations in state laws and I'm in SA and the OP is in NSW, but there are common federal laws. – HorusKol Mar 6 '16 at 23:06
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    In Australia, companies are explicitly required to treat unforeseen leave (sick leave, emergency leave, compassionate leave, etc.) as a different type of leave than generalised annual leave – roffster Mar 7 '16 at 1:34

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