Unknown to many, over the last few years there has been
a hotly contested debate regarding how annual leave loading is
treated in termination payments in respect of accrued but unused
annual leave. But, before you get too excited about joining this
thrilling contest, the Federal Court has recently put an end to the
long standing argument. And, as the dust settles, employers have
come out with the burden of paying applicable annual leave loading
as part of termination payments.
The controversy over annual leave loading and termination
payments starts with section 90 of the Fair Work Act 2009. Section
90(1) provides that when an employee takes annual leave, he/she
must be paid at the "base rate of pay". However, section
90(2) goes on to say that, when a payment in lieu of accrued annual
leave is made on termination, it must be equivalent to the amount
that the employee "would have been paid" if he/she had
taken the annual leave. These two provisions, the former of
