Q. An award-covered, full-time employee (Children’s Services Award 2010) has approached management requesting the relinquishment of her current position of supervisor. She wishes, however, to continue working with the organisation in a non-supervisory capacity. The employee has found the current position stressful and would prefer a non-supervisory position. The company has agreed to the change in role, which will result in a renegotiation of her employment conditions. This will include her current salary. The employee has been employed with us for a number of years and has accrued considerable annual leave and long service leave.
  
The employee has indicated she wishes to take annual leave in approximately six months’ time. When she takes annual leave, is she entitled to be paid at the higher rate (supervisor's rate) for any annual leave already accrued, or is payment at the new lower rate for past and future accrued annual leave? Although she has not indicated a wish to take long service leave at this stage, what is the entitlement to payment for long service leave in this circumstance? The employee is employed in the Northern Territory.
  

A. There are two separate considerations in relation to annual leave under the National Employment Standards – payment for a period of leave and the rate of accrual of leave.

  
Payment for annual leave

An employee is to be paid at their “base rate of pay” for a period of annual leave. The Fair Work Act 2009 (s16) defines this term to mean an employee’s pay for their ordinary working hours, but excluding incentive-based payments and bonuses, loadings, monetary allowances, overtime or penalty rates or any other separately identifiable amounts. This means the employee is paid at their ordinary rate of pay at the time the annual leave is taken.
In the above circumstance, the employee would be paid at their new (lower) ordinary rate of pay when annual leave is taken in six months’ time. There is no averaging of an employee’s weekly wage over a previous period of employment prescribed by the National Employment Standards, although this is a common provision under long service leave legislation.
  

Accrual of annual leave

If a change in hours had occurred as a result of the new position, this would have affected the future rate of accrual of annual leave. The employee’s ordinary hours determine the rate at which the entitlement to annual leave accrues and the entitlement to payment when annual leave is taken. 
 

For example

A full-time employee whose ordinary hours each week are 38 will accrue two weeks' leave (76 hours) over a six-month period. A part-time employee whose ordinary hours each week are 12 hours will also accrue two weeks' leave (24 hours) over the same six-month period. 
The leave is payable at the employee’s “base rate of pay.” If an employee changes the basis of their employment (e.g. full-time to part-time), there is no loss of accrued leave, although the future rate of accrual will be different, based on the employee’s new ordinary hours of work.
  

Long service leave – NT

In this case, long service leave is regulated by the Long Service Leave Act (NT). Generally, payment for long service leave is based on the employee’s current rate of pay and the average number of hours per week worked. It does not include overtime, penalties, district allowance, site allowance, etc. In the above circumstance, provided the number of weekly hours remained unchanged (meaning no averaging is required), the employee would be paid at their current (lesser) rate of pay for a period of long service leave.


Reference should be made to the relevant state or territory long service leave legislation to determine ordinary pay in this circumstance.