Can employees donate some of their accrued personal/carer’s leave or annual leave to a colleague who is experiencing financial difficulties due to illness?
 

Annual leave and personal/carer’s leave

The Fair Work Act is the source of an employee’s entitlement to paid annual leave and personal/carer’s leave, which are the most likely forms of paid leave to be offered to a work colleague in this circumstance.

While not specifically addressed in the Act, an employer would not be permitted to transfer any accrued annual leave or personal/carer’s leave from one employee to another, even with an employee’s agreement. The employer has an obligation to provide entitlements based on the service of each individual employee who performs work for the employer.

An employer is obliged to comply with the terms of the National Employment Standards and the terms of a contract of employment or other arrangement. If it contravenes the minimum terms of the Standards it would be invalid. This means an employer must accrue leave to each employee in compliance with the provisions of the Standards.
 

Long service leave

Long service is usually subject to the relevant state or territory legislation. As with the FWAct, an employee accrues long service leave by service with an employer. No state or territory legislation contemplates the employer ‘donating’ accrued leave to a work colleague at the request of an employee. Consequently, donating long service leave would contravene the relevant state or territory legislation.
 

Some suggestions

Although the employer cannot comply with an employee’s request to donate leave to a colleague, assistance could be offered in other ways.

The most obvious would be authorising an extension of paid personal/carer’s leave to the employee. If this is not financially viable, the employer may consider allowing employees to ‘cash out’ some of their annual leave, the monies could then be forwarded to their colleague, which could be done in conjunction with authorised unpaid leave for the affected employee.

Once the employer has discharged its obligations to an employee under a cashing out arrangement, any forwarding of monies by an employee beyond that point is then a private matter between the employee and the affected work colleague.

The employee may also have access to certain government entitlements.

The employer could (although it is not required to) recognise this period of unpaid leave as service for the purposes of the accrual of leave entitlements.

However, the right of an employer to agree to an employee’s request to cash out annual leave or personal/carer’s leave is restricted.
 

Cashing out annual leave

Cashing out annual leave does not address the problem of providing the affected work colleague with extra paid leave, however, it may be a way for fellow-employees to provide some assistance to alleviate the colleague's financial burden.

The employer could grant leave without pay if the employee has exhausted their balance of annual or personal/carer’s leave, while the employee receives amounts from colleagues during their absence.
 

Award/Agreement-free employees

The arrangement could not involve the employer cashing out an employee’s annual leave and forwarding it to a work colleague. Under the Fair Work Act, it is possible for an award/agreement-free employee to cash out annual leave in certain circumstances, and is a common provision in enterprise agreements.

These circumstances are:

  • the employee must be left with an annual leave balance of at least four weeks after cashing out has occurred

  • each agreement to cash out an amount of annual leave must be a separate agreement in writing, and

  • the amount is equal to the employee’s base rate of pay payable had the employee taken the annual leave.

 

Modern awards

Cashing out annual leave is permissible where provided for under the terms of a modern award. A Fair Work Commission full bench handed down a decision which inserted cashing out of annual leave terms into most modern awards as part of the 4 Yearly Review of Modern Awards.

The variation became operative from the first pay period commencing on or after 29 July 2016.
 

Enterprise agreements

Cashing out of annual leave or personal/carer’s leave is also permissible under the terms of an enterprise agreement but, in the absence of an enterprise agreement or a cashing-out term in the agreement, then cashing out leave is not an option. The employer could include terms relating to cashing out of annual leave and personal/carer’s leave in a proposed enterprise agreement.
 

The bottom line

An employer must deal with the entitlements that apply to each individual employee. The question of whether leave can be donated to a work colleague is a matter between individual employees, after an employer has discharged its obligation under the Fair Work Act.