Annual leave is one of 10 National Employment Standards (NES) which apply to all employees covered by the national workplace relations system, regardless of the award, agreement or contract.
The NES lays out the minimum entitlements to annual leave, how & when it can be taken, pay rates & what happens with annual leave when there is a transfer of employment.
In this blog, we will answer some of the commonly asked questions surrounding annual leave and lay out some of the mistakes we encounter.
What’s the minimum amount of annual leave?
All employees, except casuals, are entitled to four weeks of annual leave per year. However, the leave accrues over time, starting from the first day of employment. Annual leave continues to accumulate while the employee is on paid annual leave or paid personal/carer’s leave. However, it does not accrue on unpaid leave.
Shift workers have a minimum entitlement to 5 weeks of annual leave.
When can annual leave be taken?
As soon as it is available. It has to be agreed between employer & employee; however, an employer cannot unreasonably say no.
What if leave is left over?
You don’t have to take all your leave each year. It will ‘roll over’ to the next year. However be aware that where an employee has excessive leave an employer can request you take paid leave. Generally speaking, eight weeks (10 for shift workers) is considered excessive. The process depends on the industry and award agreements.
Can leave be taken in advance before it has been accrued?
Some awards and agreements allow employees to take their annual leave in advance once agreed in writing by their employer.
Most awards or agreements that allow payment in advance also include an agreement that must be signed. The agreement states that if you take leave in advance and don’t accrue it all back before your employment ends, then the employer can deduct the amount still owing from the final paycheck.
What happens to annual leave upon termination?
If you have any annual leave left upon termination, it must be paid out as if you had taken the leave. This will include any entitlement to annual leave loading in the Award or agreement.
However, a common mistake we see at this step is that employers overpay employees. It is of vital importance to remember that annual leave or Long Service Leave on termination are not subject to the payment of superannuation.
We know that terminations can be a fraught time for all involved, so we’ve compiled this quick checklist that might come in useful;
- Calculate leave entitlements on all ordinary time earnings in the final pay period
- Deduct any paid leave hours taken during the final pay period from the balance
- Determine the reason for the termination and tax as per the appropriate chart below
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