When an employee goes on annual leave their payment and any applicable loadings need to be calculated in compliance with the Fair Work Act and the relevant industrial instrument, such as the Award or applicable agreements. These calculations are based on the concept of Base Rate or Ordinary Pay. As we have covered in previous HR Highlights here and here Base Rate inclusions are often a cause for confusion. This HR Highlight will look specifically at Ordinary Pay and its impact on Annual Leave.

Ordinary Pay

Under the Fair Work Act the concept of Ordinary Pay refers to the Base Rate of:

  • Amount due for a period of paid leave (National Employment Standards); and
  • Rate on which penalties are calculated (s16 of the Fair Work Act).

Base Rate

Under the FWA and the NES the Base Rate does NOT include:

  • Allowances
  • Overtime
  • Penalty Rates
  • Loading
  • Bonuses

Full Rate

Confusion can be caused by the use of Full Rate, which while sounding very similar, has a very different meaning under the FWA and the NES. Unlike Base Rate, Full Rate is defined by Section 18 of the FWA as: “The amount the employee would have received if they had have been working in their standard role”.

Full Rate includes; allowances, overtime, penalty rates, loading and other bonuses as well as Superannuation.

Modern Awards

The definition of Ordinary Pay can differ under each Modern Award. For the Three main downstream petroleum Awards different types of Leave attract different definitions of Ordinary:

AWARDLEAVE TYPEORDINARY PAY
Road Transport and Distribution Award
  • Annual Leave
  • Base Rate + Leave Loading (17.5%) or the shift allowance/penalty rate that would have applied, whichever was the greater, but not both
Vehicle Manufacturing, Repair Services and Retail Award
  • Annual Leave
  • Full Rate + Leave Loading (17.5%) or the shift allowance that would have applied, whichever was the greater, but not both
Clerks Private Sector Award
  • Annual Leave
  • Base Rate + Leave Loading (17.5%) or the shift allowance/penalty rate that would have applied, whichever was the greater, but not both

Higher Duties

When an employee is acting in a higher role and receiving remuneration for that role, then goes on annual leave, this requires treatment too. If the remuneration is expressed as an allowance a higher duties allowance then it is not included for the purposes of annual leave or leave loading.

Here to Help

ACAPMA members are reminded that the ACAPMAlliance Workplace Relations Professionals are available to assist with all employment matters. For more information just call 1300 160 270.

HR Highlights are things to consider, implement and watch out for in your business. They are provided as general advice and you should seek further advice on your situation by calling 1300 160 270 and speaking to one of the ACAPMA Workplace Relations Professionals its free for members.

ACAPMA membership is affordable at only $770 per year for a single site and valuable with sites gaining HR advice support and representation as well as a raft of other benefits and discounts. Click here to apply for ACAPMA membership.

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