Annual leave under Employment Law

Annual Leave – Know Your Rights Under Employment Law

Full-time and part-time employees are entitled to paid annual leave, also known as holiday leave, under employment law.

How much paid annual leave am I entitled to under employment law?

Full-time and part-time employees are entitled to four weeks of annual leave, equivalent to their normal working hours. For example, if an employee works 20 hours per week, then after 12 months of employment they are entitled to 80 hours of paid leave.

Depending on the award, shift workers may be entitled to five weeks of annual leave. Shift workers who don’t have an award or registered agreement may also be entitled to five weeks of annual leave under employment law if:

  1. Their workplace has continuous/rotating shifts over 24 hours per day, seven days per week,
  2. They are regularly rostered on these shifts, and
  3. They regularly work on Sundays and public holidays.

How does annual leave accumulate?

Annual leave starts to accrue from the first day of employment, including any probation period. Leave continues to accumulate throughout the year, including when an employee takes paid leave such as paid annual leave or paid personal leave.

Annual leave does not accrue when the employee takes:

  • Unpaid annual leave
  • Unpaid personal leave
  • Unpaid parental leave (including the Australian Government’s Paid Parental Leave Scheme)

Any unused annual leave that accrues in a 12-month period will roll over to the next year.

Taking annual leave before it has accrued

Some awards, registered agreements and workplace policies allow employees to take paid annual leave before it has accumulated. Otherwise, an employee will have to take unpaid leave if they haven’t yet accrued paid annual leave.

When can I take paid annual leave?

The employer and employee are free to agree on when and how much annual leave can be taken. The employer must not unreasonably refuse a request to take annual leave.

The process for requesting annual leave is usually set out in an award or registered agreement, workplace policy or an employee’s employment contract.

Public holidays and personal leave during annual leave

When calculating how much annual leave has been used, it doesn’t include:

  • Public holidays
  • A period of another type of paid leave

If an employee becomes unwell or needs to care for a household or close family member during their annual leave, they may use their paid personal leave instead of their annual leave. An employee who wishes to use their personal leave entitlement whilst on annual leave will need to notify their employer as soon as possible and provide evidence when required.

Annual leave pay

Annual leave pay is an employee’s base rate of pay. It doesn’t include:

  • Bonuses
  • Overtime
  • Allowances
  • Penalty rates

However, depending on the award or registered agreement, annual leave pay may include a loading. This is more common for shift workers.

When an employee finishes working for an employer, any unused annual leave must be paid out to them.

Directing an employee to take annual leave

An employer may direct an employee to take annual leave if:

  • The employee’s award or registered agreement includes terms that require them to take paid annual leave or to be asked to take leave; and
  • The requirements are reasonable.

If an employee doesn’t have an award or agreement, an employer may still direct them to take leave if the request is reasonable.

Examples of when a request may be reasonable are:

  • The employee has an excessive amount of unused annual leave.
  • The workplace is shutting down for some time (for example, over Christmas).

Cashing out annual leave

Cashing out of annual leave is where an employee accepts pay instead of taking their accrued annual leave. Employees are allowed to cash out annual leave if their award or registered agreement allows it. Employees who don’t have an award or registered agreement may cash out their leave.

However, under employment law, the following restrictions on cashing out annual leave apply to everyone:

  • The employee must still have at least four weeks of annual leave accrued after the rest has been cashed out,
  • There must be a separate written agreement made each time annual leave is cashed out,
  • The employee must receive at least the amount of pay they would have received if they had taken the annual leave, and
  • The employee must not be forced or intimidated into cashing out or not cashing out their annual leave.

Transfer of employment

Transfer of employment occurs when there is a transfer or business or two employers are associated entities and an employee moves from the old employer to the new employer within three months.

Usually, the period of employment with the old employer will be counted as employment with the new employer. When this happens, the new employer must honour any accrued leave and other entitlements. In this situation, an employee is not entitled to having their annual leave paid out by the old employer.

However, if the new employer is not an associated entity of the old employer, they may choose not to recognise the employee’s service with the old employer. In this case, the old employer must pay out any unused annual leave.

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