An employee becomes entitled to 4 weeks of Annual Leave per year.
A week is defined when the employee takes their leave, not when they become entitled to it. This causes huge problems when an employee’s contract is varied.
For example, if Mark was working 40 hours per week at his last anniversary and his leave is in our system in hours, he received 160 hours of Annual Leave.
Let’s assume Mark has not taken any leave since his last anniversary.
If you reduce Mark’s hours to 32 hours per week, in theory his Annual Leave balance should be converted to weeks before the change, so 160 / 40 = 4
Now converted back to hours 4 * 32 = 128, so his new leave balance is 128 hours. He has lost 32 hours of leave.
However, when Mark takes leave it will be paid at the higher of his ordinary weekly earnings and his 52-week average. So, if Mark takes Annual Leave the first week after the change to his hours, his ordinary will be 80%, but his Average could be 100% of his old rate.
(If you are confused by all this, remember the bicycle)
So how do we avoid the drama? Use Leave Without Pay (LWOP)
Instead of reducing hours or rates, use LWOP to make up the employees’ hours until you have decided what the future holds.
Annual Leave Entitlements will still be granted at 100%
Annual Leave will still Pay at 100%
Once you know what the future holds, you can negotiate any permanent Employment Agreement changes with your employees.
These negotiations can then include the effect on their Annual Leave Balances.