Understanding your Annual Leave Entitlements

Annual leave is an entitlement under the National Employment Standards (NES) for all full-time and part-time employees under the national system.

The annual leave provisions of the NES should be read in conjunction with any annual leave provisions in an applicable Award or contract of employment where they are more beneficial than the provisions of the NES.

How much annual leave are employees entitled to?

In Australia, all full-time employees are entitled to accrue annual leave at the rate of 4 weeks (or 20 working days per annum). Part-time employees are entitled to a pro-rata amount of accrued annual leave.

Annual leave continues to accrue while an employee is absent from work on paid leave (such as sick leave or annual leave), however, does not accrue while the employee is absent from work on unpaid leave (such as unpaid parental leave or leave of absence).

Shift-workers (i.e. those engaged on a 24/7 roster regularly required to work Sundays and public holidays) are entitled to an additional 1 week or 5 days of annual leave per annum, accrued on a pro-rata basis for a part-time employee.

Annual leave does not apply to casual employees.

Can employees take annual leave whenever they want?

Employees can take annual leave at a time that is agreed between the employer and the employee. However, employers have the right to refuse a request for annual leave if they have reasonable business grounds for doing so.

What happens to annual leave when an employee leaves their job?

When an employee leaves their job, they are usually entitled to a payment in lieu of any accrued but untaken annual leave. The payment should be calculated based on the employee’s ordinary pay rate at the time of their termination.

Can annual leave be cashed out?

In most cases, annual leave cannot be cashed out unless there is a specific provision in the relevant modern award, enterprise agreement, or employment contract that allows for it. Employers should check the applicable industrial instrument to confirm the requirements.

What happens if an employee is sick during their annual leave?

If an employee is sick during their annual leave, they may be able to have the leave re-credited to their annual leave balance, provided they provide evidence of their illness.

Are there any penalties for not providing annual leave entitlements?

Employers who fail to provide annual leave entitlements to their employees may be subject to penalties and legal action. Employers should ensure that they comply with the relevant modern award, enterprise agreement, or employment contract.

How should employers calculate annual leave entitlements?

Employers should calculate annual leave entitlements based on the employee’s length of service, their ordinary hours of work, and any applicable modern award, enterprise agreement, or employment contract.

What if an employee has excessive amounts of leave?

There are detailed rules in Awards where an employee has excessive amounts of leave. “Excessive leave” means more than 8 weeks of accrued annual leave. If an employee has excessive leave accruals, and their employer wants to direct them to take leave, the employer must confer with the employee, and genuinely try to reach agreement on how to reduce or eliminate the excessive leave accrual. If agreement cannot be reached, then the employer may direct the employee to take annual leave, subject to the following conditions:

The remaining balance of the employee’s leave accrual must not be less than 6 weeks. So, if an employee has 8 weeks of leave (the minimum to constitute “excessive leave”), then the maximum the employer may direct them to take is 2 weeks. If they had 10 weeks, it would be 4 weeks etc;

The employer cannot require the employee to take a period of less than a week of leave; and

The employee must be given 8 to 52 weeks’ notice of when the leave is to be taken (no more, no less).

If such a direction is given to the employee they may nevertheless request to take the leave in some other way (such as a different amount of leave, or at a different time – like a time that suits their preference for a holiday arrangement etc). If such a request is made, the employer must not unreasonably refuse it. What constitutes “unreasonable” will depend on the circumstances.

What is payable to the employee when they are terminated from employment? 

The Fair Work Act states that the employer must pay the employee the amount that would have been payable to the employee had the employee taken any accrued leave up to termination of employment. This would, therefore, include payments such as annual leave loading, if applicable.

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Disclaimer

The information provided in these blog articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact Employment Innovations for advice.