Annual Leave
This is an introduction to Annual Leave (AL), giving a general overview of when AL accrues when it can be taken, when an employer can refuse a request for AL and what must be paid to an employee.
AL only applies to permanent employees (full-time, part-time and fixed-term contract employees). Casual employees and Independent Contractors are not entitled to AL.
Entitlement to Annual Leave
Pursuant to section 87(1)(a) of the Act, an employee is entitled to up to 4 weeks or 152 hours of AL for each year of service with their employer. AL accrues progressively throughout the year according to the hours worked by an employee.
Where an employee has not used all their accrued leave in one year, the remainder of the leave accrued will carry across to the next year. For example, a full-time employee who has worked for two years without taking AL will have accumulated 8 weeks of AL.
Full-time employees (employees who work 38 hours or more per week) are entitled to 4 weeks of AL each year.
Part-time employees are entitled to an equivalent amount of AL depending on their hours of work. For example a part-time employee who works 19 hours per week is entitled to 2 weeks of AL per year.
AL accrues at a rate of 0.0769 hours of leave for every hour of work performed (excluding any work in excess of 38 hours per week). This means that if a part- time employee who works 20 hours per week has been employed for 6 months (26 weeks) without taking any AL, then their AL balance would be 40 hours. Annual Leave only accrues on ordinary hours.
Taking Annual Leave
An employee is entitled to take AL with the agreement of their employer.
An employer must not unreasonably refuse a request by an employee to take AL. It will be reasonable to refuse a request for AL if the refusal is due to legitimate business concerns such as the inability to arrange replacement staff, insufficient leave balance, or a request for leave during a particularly busy period e.g. December trading.
Any agreement or refusal by an employer in relation to a request for an employee to take AL should be put in writing.
Where an employee takes leave without approval, they are not entitled to be paid for their absence and the taking of leave without approval may be a disciplinary matter.
If an employee wishes to take AL without first having accrued sufficient leave to cover the period of their absence, then an employer may agree to allow the employee to take leave in advance, putting the employee’s accrued AL balance into a negative amount – there is no obligation for the employer to agree to this.
If an employee resigns their employment or is dismissed prior to having returned their accrued AL balance to a positive amount, then the employer may deduct any owing AL from any remuneration payable upon termination of employment.
In certain circumstances, an employer may direct an employee to take AL (Direction to Take Annual Leave).
Payment for Annual Leave
Where an employee has approval to take AL as outlined above, they are entitled to be paid for AL taken, provided they have accrued sufficient AL.
An employee who has taken AL must be paid at their base rate of pay for their ordinary hours of work during their absence.
An employee’s base rate of pay is their hourly pay excluding any bonus payments, loadings, monetary allowances, overtime or penalty rates. For example: “John is a part-time mechanic who works 7:30AM to 5:30PM on Fridays and Saturdays with a 1 hour unpaid meal break. John earns $24 per hour for his Friday work and $36 per hour for his Saturday work. John has worked for the Business for 12 months without taking any leave. John requests to take annual leave for one Saturday so that he can visit family interstate, his employer agrees to this.” In this scenario John would be entitled to AL and would be entitled to be paid 9 hours’ worth of AL at $24 per hour totalling $216.00.
Annual Leave Loading
In addition to payment for AL as outlined above, the Vehicle Award and some other Awards require that employer pay an annual leave loading of an additional 17.5% on top of any amounts paid for AL.
In relation to the above scenario with John, the annual leave loading would be paid on top of the $216.00 at a rate of 17.5% of the amount paid to John. In this scenario, John would receive $253.80 with the AL loading.
AL Loading is payable on all AL accrued whether that AL is taken by the employee or paid out upon termination of an employee’s employment.
Annual Leave in Advance
Both employer and employee may agree in writing to taking a period of paid annual leave in advance (Agreement to Take Annual Leave in Advance). The agreement must have the amount of leave taken, the leave date and signed by both parties. (Employees under the age of 18 will need a parent or guardian to sign off.)
A copy of the agreement must be kept for employee records. If on termination the employee has not accrued enough leave to cover the period of paid leave taken, the employer may deduct from any money owed to the employee on termination, an amount equal to the amount of paid leave taken.
Cashing Out of Annual Leave
An employee is entitled to cash out their annual leave (under the Vehicle Award and certain other Awards) and this must be agreed upon in writing (Agreement to Cash Out Annual Leave). Each cashing out of a particular amount of paid annual leave must be subject to a separate agreement.
The payment cannot be lesser than the amount the employee would have taken at that time and the maximum amount in a 12 month period is 2 weeks.
Payment of Annual Leave on Termination
An employer is required to pay accrued but unused AL upon the termination of an employee’s employment. AL loading is also payable on any AL paid this way.
If you have a query regarding annual leave, please contact the Workplace Relations Team using the form below, or call: (08) 8291 2000.
