LAWYERS have warned that a decision by Fair Work Australia which trades holiday pay for higher wages overall could lead to workers not taking their annual leave.

The 2-1 full bench decision approved an agreement for a New South Wales paint contractor to pay a higher hourly rate to workers throughout the year in return for no annual leave, sick leave or public holiday pay.

But workplace lawyer Mark Howard from Middletons law firm warned that if such agreements become commonplace workers may not take leave because they could not afford to.

“The effect of having these sorts of clauses in the agreement is it will discourage workers from taking leave because they won’t have the financial wherewithal to survive,” Mr Howard, Workplace Relations and Safety partner, said.

“It’s a novel but lawful approach to the payment of annual leave entitlement.

“But it (the decision) wasn’t without dissent, largely due to concern that it may act as a disincentive to employees from taking annual leave if there’s some difficult financial circumstances in the family for example.

Mr Howard said the decision found the agreement did not amount to an illegal “cashing out” of annual leave and complied with the National Employment Standards.

Nereda Thomas, Special Counsel, from Justitia Lawyers and Consultants said that the decision would be good for employers in industries that require flexibility, but warned that workers should be aware of their rights and the implications of the agreement.

“It’s a win for flexibility in work arrangements,” Ms Thomas said. “But it might not be a win for some employees who vote against an agreement or who might feel compelled to vote for an agreement for other reasons.”

Under the Fair Work-approved arrangement employees will not get their monies paid at the time the leave is taken, but get it paid throughout the year in wages.

Other employers who want a similar agreement will have to bring it to Fair Work Australia for approval and negotiate an appropriate fixed hourly rate.

The agreement was negotiated by Irving Warren, executive director of the Building Industry Specialist Contractors Organisation of NSW on behalf of Hull-Moody Finishes, a Sydney painting contractor that employs seven workers.

Tourism and Transport Forum chief executive John Lee said the decision could have unintended consequences, including damaging the Australian tourism industry.

“While we support employment flexibility, this decision could see a surge in the number of Australians who don’t receive holiday pay,” Mr Lee said.

“This will reduce the likelihood of them taking a holiday, leading to a potential downturn in tourism activity throughout Australia.”

He said the decision risked undermining the Government’s “No Leave, No Life” campaign to promote domestic tourism by emphasising the need to take a break to boost national productivity.

“But this decision by Fair Work Australia could result in exactly that – Australians having no leave and no life because they’ve traded away their leave entitlements,” Mr Lee said.

Greens workplace relations spokesman Adam Bandt said the Federal Government needed to close the loophole in the legislation that would allow employers to pay their workers nothing during their annual leave.

The decision would severely affect the health and welfare of Australian workers, Mr Bandt said.

“Everyone should be entitled to paid annual leave as a matter of law,” he said.

“If annual leave is unpaid, there’s a real risk that people won’t take it.”

The Federal Government will hold a review of the Fair Work Act early next year.