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I agree with an employee to transfer his employment from a subsidiary to a holding company but only on terms that the subsidiary company payout his annual leave upon transfer. Is that agreement effective?

Frequenty Asked Questions

I agree with an employee to transfer his employment from a subsidiary to a holding company but only on terms that the subsidiary company payout his annual leave upon transfer. Is that agreement effective?

No. The new employer in a transfer of employment situation can only decide not to recognise the transferring employee’s service with the old employer for the purposes of annual leave where the transfer of employment is between non-associated entities. The old employer could only cash out annual leave immediately before the transfer, subject to Fair Work Act rules (see section 94). If that occurs lawfully, then because the transferring employee has already had the benefit of annual leave calculated by reference to a period of service with the old employer, the new employer does not need to count that service when calculating the employee’s entitlement (section 22(6)).

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