Annual leave and the law: Here’s what you need to know

All work and no play can throw anyone’s life off balance, and that’s why annual leave is a right that employees value so greatly.  

But are all workers entitled to it? Are you always obliged to give leave requests the tick of approval, and can you force your employees to take leave when it may not suit them? 

Annual leave entitlements are governed by specific regulations that depend on factors like employment contracts, enterprise agreements and employment law.  

As an employer, you have obligations and rights when it comes to granting or declining annual leave applications, so we’ve asked an employment lawyer to explain the legal requirements. 

Who’s entitled to annual leave and how is it calculated? 

Annual leave entitlements are outlined in the National Employment Standards and they differ depending on the nature of employment. 

Full-time employees in Australia accrue 4 weeks of annual leave per year, which equates to 20 days per year. While part-time employees are also entitled to 4 weeks of annual leave per year, it’s accrued at their pro rata rate. Casual employees don't accrue any annual leave.  

Can you reject an annual leave request? 

Andrew Jewell, Principal, Jewell Hancock Employment Lawyers, explains that if an employee has accrued annual leave, they're entitled to apply for it, even if they haven’t built up more than 4 weeks. You can only reject the request on reasonable grounds.  

“These are limited, but might include seasonal demands, such as an accountant at the end of the financial year, or other staff shortages,” says Jewell. “Employers should be careful in refusing annual leave as this can have other negative impacts, such as to staff morale.” 

While there are no general requirements for employees to give notice for annual leave, Jewell says some notice requirements may be outlined in an award, enterprise agreement or employer policy. 

“Employees should provide as much notice as possible, as the notice provided is a consideration in the reasonableness of accepting or rejecting the request,” he says. 

Can you force employees to take annual leave? 

Annual leave accrues indefinitely and doesn't expire. As it’s an entitlement, employees may prefer to take it when it suits — to save it up for a big holiday, for example, or to build it up for when they really need it. 

This approach may not suit all employers, as untaken annual leave is recorded as a liability on balance sheets. 

Jewell says there are two situations where you can direct employees to take leave – during a Christmas shutdown period or where an employee has accrued excessive leave. 

But if employees are covered by an enterprise award or agreement, Jewell says it’s important to check the provisions about directing them to take excess annual leave.  

What happens to untaken annual leave? 

Whether an employee leaves your organisation voluntarily, or if they are fired or dismissed because of redundancy, you still have an obligation to pay their unused annual leave. 

“Accrued and untaken annual leave must be paid to the employee upon the cessation of their employment, regardless of the reason for the cessation,” says Jewell.  

Can you dismiss an employee on annual leave?  

Jewell says that while it’s not strictly illegal to dismiss an employee while they’re on annual leave, it's unlawful to dismiss them because they take annual leave. 

“Further, if an employee is on annual leave, it is likely that a dismissal would be procedurally unfair,” he says. 

Annual leave is an important ingredient for work-life balance and a key driver for employees, so it’s important that you understand your legal obligations. As it’s a legal entitlement of full-time and part-time workers, you can only reject leave requests on limited reasonable grounds. And, if an employee leaves your company for any reason, you must pay them for the leave they’ve earned. 

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