Annual leave under the national system

Federal and state legislation provides employees across all jurisdictions with minimum annual leave entitlements.

For national system employees, these entitlements are provided under the National Employment Standards (NES), as set out in the Fair Work Act 2009 (Cth) (FW Act): Pt 2-2 Div 6. For non-national system employees, annual leave entitlements are prescribed by the relevant state or territory legislation.

The minimum entitlement to annual leave of an employee under the NES is 4 weeks’ paid annual leave for each year of service with the employer. Annual leave accrues throughout the year and unused leave is rolled over to the following year. Shift workers are entitled to one additional week of annual leave.

Modern awards and enterprise agreements made under the FW Act may also contain provisions dealing with annual leave, although such provisions must not derogate from the annual leave entitlements of employees under the NES.

See Annual leave under the national system.

Taking annual leave under the national system

Once accrued, annual leave may be taken at a time and for a period agreed between the employee and employer. An employer must not unreasonably refuse an employee’s request to take leave.

An employer may reasonably require or direct an employee to take a period of annual leave at a designated time or in certain circumstances. Many awards and enterprise agreements expressly provide that an employer may direct an employee to take annual leave if they have accrued an excessive balance. However that is usually subject to the employer having first tried to reach agreement with the employee on how to reduce the excessive leave. An employer may direct an award and agreement-free employee to take any excessive annual leave provided the request is reasonable and the employee retains a minimum balance.

Many modern awards provide for the employee to take leave in advance of accrual, with the agreement of the employer. The employer may be able to recover annual leave paid in advance from an employee’s termination payments if the employment ends before the employee accrues an equivalent amount of leave.

See Taking annual leave under the national system.

Payment for annual leave under the national system

Under the NES, annual leave is calculated at the employee’s base rate of pay for their ordinary hours of work. It does not include any overtime rates, penalties and other allowances that an employee would have been paid if they had worked during that period, unless an applicable award, enterprise agreement or contract of employment provides otherwise.

Many employees are paid an annual leave loading (usually 17.5%) above their base rate of pay during a period of annual leave.

In most cases, an employee can enter a written agreement with their employer to cash out annual leave, provided that the employee is not left with a balance of less than 4 weeks’ leave and the employee is paid the full amount that would have been payable had the employee taken the leave at the time the payment is made. Modern awards and enterprise agreements may impose additional conditions on when and how annual leave may be cashed out.

Upon termination of employment, unused annual leave must be paid to the employee.

See Payment for annual leave under the national system.

Annual leave under state/territory law

For employees not covered by the FW Act, annual leave entitlements are prescribed by the relevant state legislation. This includes public sector workers in New South Wales, Queensland, South Australia, Tasmania and Western Australia (including, in some instances, local government employees) plus, in Western Australia, private sector employees whose employer is not a constitutional corporation. All employees in the Territories and Victoria (apart from a limited number of employees who are excluded form that State’s referral of legislative power) are covered by the FW Act.

Like the FW Act, state and territory legislation provides for a base entitlement of 4 weeks of paid annual leave for each year of service with the employer which accrues progressively over the course of the year and any unused leave carries over to the next year. Shift workers are similarly entitled to an additional one week’s paid annual leave each year.

The terminology used in the various state and territory legislation differs in certain respects, eg, some refer to “annual leave” whilst others refer to “annual holiday”, and some refer to “workers” and others to “employees”. Nevertheless, the key features of all five systems are essentially the same.

See Annual leave under state/territory law.