Receving Income Protection (through Employer) and Annual Leave

bobbified on 08/10/2020 - 12:14
Last edited 08/10/2020 - 13:59

I was wondering if anyone knew whether annual leave should be accrued while I receive income protection through my employer.

Normally, if a person is on extended sick leave (after all the paid sick leave is exhausted), it would be counted as Leave Without Pay (LWOP) since the company isn't paying anymore and income protection payments will usually be paid directly to the person from the super fund or the insurance company. Therefore, annual leave wouldn't accrue.

In this case, the income protection insurance policy is held by the employer and the payments are paid from the insurance company directly to the employer. The employer then pays out the funds to the employee on a regular basis.

My question is, should annual leave (and any other accruals) continue to accrue during the time off given the income protection payments are paid through the employer as per ordinary wages (but at the reduced rate of 75% + super)?

There doesn't seem to be much on the Fair Work website and there's no details in my employment contract in relation to this specific scenario. I have a feeling this is one of those grey areas that might need to be argued one way or another.

Anyone have any thoughts or able to point me somewhere that clarifies the situation?

UPDATE: User thatonethere has provided a very useful link with the information I need in this link

Employees on Worker's Compensation accrue annual leave, but employees on income protection, being paid by a third party independent of any employer obligation, don't. The difference is whether the employer has an obligation to pay the employee. I'll need to go back to the employment contract to check how it's worded in relation to the income protection policy they hold for their employees.

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Education & Work

Comments

  • jimbobaus on 08/10/2020 - 12:20
    +2

    Regardless of who holds the policy the employee or the employer Annual Leave is not accured while on IP payments.
    The PDS from the insurer will show this as a condition.

    No income protection policy sold in Australia accrues AL when paid.

    An employee does not accrue leave under the National Employment Standards when absent on unpaid leave even if the employee is receiving income protection payments from an insurer

    • bobbified on 08/10/2020 - 12:22
      -4

      An employee does not accrue leave under the National Employment Standards when absent on unpaid leave even if the employee is receiving income protection payments from an insurer.

      Normally, that would be the case, except I'm receiving payments through my employer. So is it really "unpaid leave" when the employer is paying me? Where the employer gets the money from may or may not be relevant. That is my question.

      • jimbobaus on 08/10/2020 - 12:23
        +1

        Your employer is passing on a payment from an insurer.
        So the conditions of the insurance policy would apply.

        • bobbified on 08/10/2020 - 12:26
          -3

          So the conditions of the insurance policy would apply.

          Insurer's have nothing to do with the accrual of annual leave. They've specified in the PDS what they pay during a claim and they've fulfilled their obligations in paying out that amount.

          Annual leave accrual is between the employer and the employee.

          • jimbobaus on 08/10/2020 - 12:35
            +1

            @bobbified: You are not being paid by your employer (they are simply passing on the entitlement under the policy)
            You are being paid by an insurer
            its their conditions that apply, if their policy allows for annual leave accural then it will be paid (to your emplpyer)
            as i said no policy has this in Australia that i know of.

            Your employer may hold the policy but it is no different than if you held one yourself
            Your employer is passing the payment on, but it is the insurance policy thats paying you so therefore its their conditions which dictate whether you earn leave or not

            TLDR: Unless the insurance policy states you earn leave, you will not earn leave regardless of how the payment is delivered to you

            • thatonethere on 08/10/2020 - 12:56
              +1

              @jimbobaus: I think the crux is that whilst on unpaid leave you do not accrue annual leave. Regardless of payments from insurer etc.

              Good write up here https://www.workplaceassured.com.au/news/leave-accrue-while-…

              • bobbified on 08/10/2020 - 13:14
                -2

                @thatonethere: This is where I think it might be different to a typical person on LWOP and getting insurance payments directly from the insurance company.

                The employee is still being paid by the employer. Is it relevant where the employer gets the money from?

                • jimbobaus on 08/10/2020 - 13:26

                  @bobbified:

                  This is where I think it might be different to a typical person on LWOP and getting insurance payments directly from the insurance company.

                  The employer is paying the benefit on behalf of the insurer so the insurers terms apply.

                  No different from those on JobKeepr (only and not working) not being entitled to Super

                  • bobbified on 08/10/2020 - 14:22

                    @jimbobaus: Please see update: thatonethere has provided the link. Whether an employee accrues annual leave depends on whether the employer has an obligation to pay the employee. The insurer has nothing to do with it.

                    • jimbobaus on 08/10/2020 - 14:26

                      @bobbified: And the employer is not obligated… the insurer is paying

                      • bobbified on 08/10/2020 - 14:34

                        @jimbobaus: The accrual of annual leave hinges on the obligation of the employer to pay. The case in the link talks about a "paid by a third party independent of any employer obligation."

                        In my case, the insurer is not independent of the employer. It IS their policy. So whether or not the employer has an obligation to pay would actually depend on how they've worded it in the employment contract. That is, did the company take out the policy to insure themselves or did they take out the policy to insure the employee?

                        • jimbobaus on 08/10/2020 - 14:37

                          @bobbified: As someone who has had many the employee and also had similar type insurance
                          The way it is legally, is even if i pay the policy payments to the employee it is still the insurer who is paying.
                          they simply make a single payment to me which i then pass on as instructed by them.
                          they even deduct tax from what they send me and forward to ATO
                          The employee will have a listing on their tax file with the insurer as the payer not me.

                          Annual Leave is not payable unless the policy the employee is under strictly states it will be paid (again by the insurer)

                          • bobbified on 08/10/2020 - 14:42

                            @jimbobaus:

                            The employee will have a listing on their tax file with the insurer as the payer not me.

                            The PAYG certificate and everything else for the past couple of years says that the Payer is <Employer Name>, not insurer. Superannuation also says <Employer Name> paid.

                            • jimbobaus on 08/10/2020 - 14:44

                              @bobbified: Have you been paid IPI in the past few years?
                              or only this financial year?

                              • bobbified on 08/10/2020 - 14:50
                                +1

                                @jimbobaus: I've been paid over the last two financial years and have only recently returned to work.

                                To be honest, while it's good to have the income, it's been stressful, frustrating and just a very big mess. Now that I'm almost recovered and had a chance to properly look at everything, I've had to go back to the insurer and employer to demand that they correct a number of items. I've been in the industry for a quite a number of years at the technical and management levels so I understand a lot of the ins and out. I would be out of pocket tens of thousands of dollars right now if I didn't say anything. And they're just the issues I've found so far.

                                It really makes me wonder what happens to everyone else that doesn't know any better and just accepts what they're told as being correct.

                                • jimbobaus on 08/10/2020 - 15:02

                                  @bobbified: Its def set up different to the way we did it.
                                  that is really only going to confuse the matter

                                  • bobbified on 08/10/2020 - 15:11

                                    @jimbobaus: Yeh, it's definitely different to usual - hence my original question. I'm familiar with things on the insurance side, but not the employer side. I was trying to push the points you made a little because my employer hasn't been helpful in any way shape or form and I've had to do a lot more than necessary to prove my point (or disprove their point) before they'd even take any action.

                                    Thanks for trying to help out anyway :)

              • bobbified on 08/10/2020 - 13:46

                @thatonethere:

                Good write up here https://www.workplaceassured.com.au/news/leave-accrue-while-…

                This link is good. Thanks for this! It's exaclty what I'm looking for. I'll have a proper read of it after work to digest the informaton!

            • Drakesy on 08/10/2020 - 13:00
              +6

              @jimbobaus: OP comes to Ozbargain expecting them to support their point of view.
              Ozbargain doesn't.
              Continues to push point of view until someone agrees.

              • bobbified on 08/10/2020 - 13:11
                -2

                @Drakesy: I'm not here to push a point either way. I need something solid because I know that if I was going to bring something to my employer, they will push back - with or without actual cause. in the past, they've just given wishy-washy answers.

                Also, I work in insurance and I know for a fact that insurance companies do not set policies around annual leave for claimants.

                • Hardlyworkin on 08/10/2020 - 13:19

                  @bobbified: Are you going to copy and paste someones opinion on Ozbargain to provide the 'solid proof' to your employer?

                  • bobbified on 08/10/2020 - 13:22

                    @Hardlyworkin: No, I'm not. But if there's something that makes sense, I will be following it up with my own research.

  • trex on 08/10/2020 - 13:44

    When your employer pays you the income protection payment I think it is misleading to call it ordinary wages (but at the reduced rate of 75% + super). Your employer is simply passing the income protection payment to you because you are on unpaid leave after exhausting paid sick leave. Since you are on unpaid leave, annual leave should not accrue.

    PS: I don't think there should be Super contribution on income protection payments.

  • Pufff on 08/10/2020 - 15:27

    I'd doubt it. What if someone is on IP until age 65 when they get injured at 30? Are they going to accrue leave for 35 years even though they're not working?
    Employment contracts I've read usually say you don't accrue leave unless you're at work. Eg if you take career break, mat leave etc you dont accrue leave.
    But in saying that there can always be exceptions.

    Edit: I don't think it matters the way the money gets to you as much as whether you are at work or not.

  • MercSal on 08/10/2020 - 16:16

    All income protection policies require the employee to be on unpaid leave. You are then paid compensation for that economic loss. Thus you are on unpaid leave and are not accruing additional leave entitlements.

    There has been some consideration of this in the Commission, nothing definitive, but what there is suggests leave does not accrue while on income protection, regardless of whether the employer takes out the policy or not.

    • bobbified on 08/10/2020 - 16:30

      All income protection policies require the employee to be on unpaid leave. You are then paid compensation for that economic loss. Thus you are on unpaid leave and are not accruing additional leave entitlements.

      I have to admit that don't know too much about the behind the scenes of Workers Comp, but doesn't it work in a similar way to what you describe above? According to the advice in the link in the OP, annual leave apparently accrues while on WC payments?

      • MercSal on 09/10/2020 - 08:35

        That's because WC works in a different mechanism. WC is governed by legislation regarding the obligations. Essentially, in most states, it plays out like the employee is on PAID personal leave, and the employer is compensated for the cost of it.

        Income protection is a straight insurance product and has no legislative backing behind it,

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