Imagine a company is making several positions redundant due to a downturn in business. One employee has worked for the company for just under four years but was absent on leave without pay for 12 months when he travelled overseas.
The appropriate period of notice of termination is determined by the number of years of continuous service completed by an employee. The Fair Work Act excludes leave without pay from its definition of service.
But what about redundancy pay and the notice period? To calculate the appropriate period of notice and redundancy pay, is the period of leave without pay counted as service?
Leave without pay and notice periods.
Leave without pay counts as service to determine the appropriate period of notice of termination required to be given by the employer under the National Employment Standards but is not taken into account when calculating redundancy pay.
Under the Fair Work Act (s22(4)), service – concerning notice of termination or payment in lieu, requests for flexible working arrangements and parental leave and related entitlements – only exclude a period of unauthorised absence.
Leave without pay with an employer’s consent is considered a period of ‘unpaid authorised absence’. Unpaid leave, such as unpaid parental leave under the National Employment Standards, would also count as service to determine the appropriate period of notice of termination.
In this case, the employee has completed less than four years' continuous service with the employer and would be entitled to three weeks' notice of termination (or payment in lieu).
Examples of ‘unauthorised absence’ (which do not count as service) include. When an employee has abandoned their employment, is engaging in industrial action or is otherwise absent from work for a period contrary to a direction made by the employer.
Redundancy pay
The Fair Work Act (s22(2)) provides that periods that do not count as service (excluded periods) are:
- any period of unauthorised leave or
- any period of unpaid leave or unpaid authorised absence, other than community service leave or a period of stand down.
This means that leave without pay is not considered when calculating the amount of redundancy pay due to an employee under the National Employment Standards.
It also means an employee does not accrue paid annual leave or paid personal/carer’s leave when absent on leave without pay.
The bottom line: Leave without pay is counted as service to determine the appropriate minimum period of notice of termination required to be given by an employer to an employee under the National Employment Standards.
