Paid leave entitlements and workers compensation

The effect of a period of income compensation on an employee’s accrual of annual leave and personal leave will depend on when the absence on a period of income compensation occurred.

From 1 July 2024, under the Workers Compensation and Injury Management Act, an employee accrues entitlements to annual leave and personal leave during any period for which they are entitled to receive income compensation. This includes where the employee is absent from work and entitled to receive income compensation.

The entitlement to accrue annual leave and personal leave during a period of income compensation will apply irrespective of any less favourable condition within a WA award or agreement.

Under the Minimum Conditions of Employment Act, a full time or part time employee accrues personal leave and annual leave and entitlements based on the number of hours the employee is ordinarily required to work in a 2- or 4-week period (respectively) during a year of service.

The arrangements for calculating annual and personal leave accrual under the Minimum Conditions of Employment Act changed on 31 January 2025.

The effect of a period of income compensation on an employee’s accrual of annual leave and personal leave will therefore depend on whether the absence on a period of income compensation occurred:

• before 1 July 2024
• during the period 1 July 2024 to 30 January 2025;
• from 31 January 2025.

Periods of income compensation from 31 January 2025

From 31 January 2025, the Minimum Conditions of Employment Act sets out how a full time or part time employee who is entitled to income compensation under the Workers Compensation and Injury Management Act accrues personal leave and annual leave. Such an employee is called a ‘compensated employee’.

For the purposes of annual and personal leave accrual in a particular year of service, the hours an employee is ordinarily required to work in a 4- or 2-week period in that year must not include a period when the employee is or was a compensated employee.

For example, if a compensated employee has been receiving income compensation for 4 months in a particular year of service, that 4-month period is excluded from the hours the employee would ordinarily work in a 4-week period. This means a compensated employee’s entitlement to annual leave is based on the hours the employee is ordinarily required to work during 8 months of that particular year of service.

In some circumstances, it may not be possible to determine the number of hours a compensated employee is ordinarily required to work in a 2- or 4-week period in a particular year of service. For example, a compensated employee may have been entitled to income compensation for that entire year of service. As the period of income compensation is excluded from the hours they would ordinarily work, they have no hours they were ordinarily required to work during a 2- or 4-week period in that year.

If a compensated employee’s hours cannot be determined, the employee’s hours for each week in that period are their average weekly hours. ‘Average weekly hours’ are the average hours the employee worked each week during the shorter of the following periods:

• the 365 days immediately before the employee became entitled to receive income compensation;
• the period of employment immediately before the employee became entitled to receive income compensation.

A compensated employee’s average weekly hours must also exclude any period during which the employee was on unpaid leave and any period during which the employee was stood down in accordance with an award, agreement, contract of employment or legislative provision.

Example 1: Employee received income compensation for part of year of service

• Louise was injured at work. She has been receiving income compensation for 4 months.
• Prior to her period of income compensation, Louise was required to work 38 hours per week.
• Louise is entitled to accrue personal leave during the 4-month period for which she is entitled to receive income compensation.
• Louise’s employer Raj needs to calculate Louise’s personal leave accrual whilst she is absent from work and receiving income compensation.
• Louise is entitled to paid personal leave for the number of hours she is ordinarily required to work in a 2-week period during that year.
• As the hours an employee is ordinarily required to work in relation to a particular year of service must not include a period when the employee is entitled to receive income compensation, Raj must refer to the hours Louise was ordinarily required to work in the year of service prior to her period of income compensation.
• In the 8 months prior to being entitled to receive income compensation, Louise was ordinarily required to work 76 hours in a 2-week period. Her personal leave entitlement is therefore 76 hours for that year of service.

Example 2: Employee received income compensation for entire year of service

• Noah was injured at work and is currently receiving income compensation. He has been entitled to receive income compensation for that entire year of service.
• In the 365 days immediately prior to his 12-month period of income compensation, Noah worked varying part time hours.
• Noah is entitled to accrue annual leave during the period for which he is entitled to receive income compensation.
• Noah’s employer Sherika needs to calculate Noah’s annual leave accrual while he is absent from work and entitled to receive income compensation.
• Noah is entitled to paid annual leave for the number of hours he is ordinarily required to work in a 4-week period during that year.
• As the 4-week period cannot be during a period when Noah was entitled to receive income compensation and, as Noah has been entitled to receive income compensation for the entire year of service, it is not possible to determine the hours he was ordinarily required to work in a 4-week period during that year of service.
• Sherika must therefore average the total number of hours Noah worked over the 365 days immediately before he became entitled to receive income compensation to determine his average weekly hours.
• Noah’s hours are averaged to be 31.5 per week. As this equates to 126 hours in a 4-week period, he is entitled to 126 hours of annual leave for that year of service.

Periods of income compensation from 1 July 2024 to 30 January 2025

The personal leave and annual leave accrual of an employee who was entitled to receive income compensation during the period 1 July 2024 to 30 January 2025 was determined according to the Minimum Conditions of Employment Act as it applied prior to 31 January 2025.

An employee accrued personal leave and annual leave on the basis of the hours they were ordinarily required to work in a 2- or 4-week period in a particular year of service. Whilst prior to 31 January 2025 an absence on a period of income compensation was not expressly excluded under the Minimum Conditions of Employment Act, if the employee did not work during a period of income compensation, the period of income compensation would in effect be excluded as it would not constitute hours the employee was ordinarily required to work.

If the number of hours for which an employee was entitled to be paid for a period of leave could not be determined, the total hours worked by the employee during the shorter of a period totalling 365 days or the employee’s period of employment were averaged. Again, if the employee did not work during a period of income compensation, that period would not be included in the averaging of the employee’s hours.

Periods of income compensation before 1 July 2024

Annual leave and personal leave did not accrue during an absence on a period of income compensation before 1 July 2024 unless:

• the employee was performing work during the period of income compensation, including participating in a return to work program, in which case they accrued annual leave and personal leave for any time that they performed work;
• the employee was receiving paid annual leave or long service leave while (i.e. at the same time) they were receiving income compensation payments; or
• the relevant WA award or agreement specifically stated that it does. For example, the Building Trades and Labourers (Construction) Award states that employees continue to accrue annual leave while absent from work and receiving workers compensation (up to a maximum of 26 weeks).

Annual leave

Under the Workers Compensation and Injury Management Act, a worker is entitled to take annual leave during a period of income compensation.

‘Take leave’ means to take time off work with pay on annual leave or to receive monetary payment instead of taking time off work with pay on annual leave (that is, to cash out their annual leave).

Personal leave

The Workers Compensation and Injury Management Act provides that, for any period for which an employee is entitled to receive income compensation, the worker is not entitled to take sick leave for an absence from work because of the worker’s injury.  

If an employer pays a worker any amount as a sick leave entitlement for any period for which the worker subsequently receives income compensation:

• the amount paid to the worker as a sick leave entitlement is taken to have been paid as, or towards, income compensation; and
• the employer must reinstate any period of sick leave to which the sick leave entitlement relates.

The Workers Compensation and Injury Management Act does not, however, prevent a partially incapacitated employee who is receiving income compensation and performing some work for their employer from taking personal leave for caring purposes, or for an illness or injury that is not because of the injury for which the worker is receiving income compensation.

Bereavement leave

A partially incapacitated employee who is receiving income compensation and performing some work for their employer may take paid bereavement leave.

If an employee is a compensated employee under the Minimum Conditions of Employment Act), their rate of pay for a period of paid annual leave, personal leave or bereavement leave is the higher of the following:

• the employee’s rate of pay at the time the leave is taken;
• the employee’s rate of pay immediately before the employee became entitled to receive income compensation.

In the above, the employee’s ‘rate of pay’ means the rate that the compensated employee would have been entitled to receive as payment under an award, agreement or contract of employment (whichever provides for the higher rate), had the employee not become entitled to receive income compensation.

A ‘compensated employee’ is an employee who is entitled to receive income compensation under the Workers Compensation and Injury Management Act, whether or not the employee is also performing work for their employer while receiving income compensation.