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Annual Leave for Employees

In Australia, permanent employees have the right to access paid annual leave under Fair Work Act 2009 (Cth) and the Federal Government’s National Employment Standards (NES). This article outlines the annual leave entitlements for employees in Australia, including how an employee can request leave and when an employer can refuse to grant annual leave.

National Employment Standards

The NES mandates that employees in Australia have a right to proper remuneration, safe working conditions and appropriate leave entitlements. Under the NES, part-time and full-time employees accrue paid annual leave as they work ordinary hours. A full time (38 hour week) employee accumulates 4 weeks (152 hours) every year. A part-time worker accumulates leave at a pro rata rate: for instance, a part-time employee working 20 hours a week accrues 80 hours per year. A shift worker accrues 5 weeks per year in recognition of the additional challenges of shift work.

Annual leave still continues to accrue if an employee is on long service leave, jury duty, or paid sick leave, but not when an employee has taken unpaid leave.

Requesting Annual Leave

An employee cannot take leave without the approval of their employer. The process of requesting it is typically specified in an employment agreement, award, enterprise agreement or company policy.

Some employees prefer to take their leave piecemeal for special occasions or to arrange appointments that must happen within work hours, while other workers reserve their leave and take it in larger blocks for holidays or projects, subject to their employer’s genuine business needs.

Under the NES, an employee is not obligated to take their leave in the year that it is accumulated. Leave entitlements roll over to the following year. There is no minimum (or maximum) number of hours that an employee can take. However, an employer can direct an employee to use their leave if they have accrued too much.

If an employee is sick while on annual leave, they can arrange with their employer to take the time as sick leave instead. In this case, the employer is entitled to ask for evidence such as a medical certificate to support this claim. By contrast, an employer is not entitled to ask an employee to take annual leave instead of sick leave or carer’s leave if their circumstances change.

Can An Employer Refuse?

Annual leave is an employment right in Australia, and an employer is not legally allowed to unreasonably refuse a request. The Fair Work Commission has confirmed that Australian employers may refuse to grant annual leave for a genuine, sound business reason. What constitutes reasonable and unreasonable depends on a number of factors, including:

  • The length of time that the employee wants to take;
  • The operational requirements of the company during the proposed leave period;
  • Whether the leave would be detrimental to the business;
  • Whether the employee gave sufficient and reasonable notice;
  • The amount of annual leave that the employee has accrued;
  • Whether the employee took leave recently;
  • If another worker has already been granted leave for the same period;
  • If the employee has had a coveted time of year off before (such as school holidays) and it is unfair not to offer the privilege to other workers.

Companies in Australia will often have an operational time period in the year that is known as a “Block Out Period” when it is company policy to refuse requests. The Fair Work Commissioner in Stevens v Horsley Park Supermarket Pty Ltd [2017] concluded that Block Out Periods during the Christmas, Easter and New Year period is a reasonable business practice for a retail business.

Another reason that an employer may refuse to grant annual leave is if the employee has not accrued sufficient leave. If an employee has already taken their entitlement and asks for more, the company can either approve leave in advance, thereby creating a negative leave balance, or the company can grant unpaid leave.

Can An Employer Cancel Approved Annual Leave?

Sometimes, an employer will grant an annual leave request, and then circumstances change and the employee is needed during that time period. Employers are not legally entitled to cancel leave that has already been approved but they can do so with the employee’s consent. An employer cannot coerce or otherwise force the employee to cancel their leave in the interests of the business. An employee can make a general protections claim to the Fair Work tribunal if the employer uses overt or covert force to make the employee agree to cancel their approved leave.

An employer should investigate every other option before asking an employee to agree to cancel their leave. A company that does ask their employee to cancel their annual leave should consider reimbursing their employee for any costs associated with cancelling or rescheduling their plans.

What Happens To Untaken Annual Leave?

Some employers will allow an employee to take unused annual leave in cash rather than days off if that is their preference. However, there is no requirement for an employer to allow this for continuing employees.

When employment ends (either through termination or resignation), any annual leave entitlement must be paid out at the current base rate to the employee upon their exit. If the business is sold, then the new owner must either recognise the accumulated leave entitlement, or the old owner will have to pay out the entitlement. If the employee passes away with unused annual leave, the employer must make arrangements to pay out any entitlements to the deceased estate or the person entitled under the law, award or agreement.

Armstrong Legal can help if you feel that you have been unfairly denied annual leave, or have another legal question about annual leave such as payouts for leave entitlements. Please contact Armstrong Legal on 1300 038 223 for assistance with any type of employment law matter.

Dr Nicola Bowes

This article was written by Dr Nicola Bowes

Dr Nicola Bowes holds a Bachelor of Arts with first class honours from the University of Tasmania, a Bachelor of Laws with first class honours from the Queensland University of Technology, and a PhD from The University of Queensland. After a decade working in higher education, Nicola joined Armstrong Legal in 2020.

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