How much annual leave are employees entitled to?

Full-time and part-time employees are entitled under the NES to receive four weeks' paid annual leave each year. Your annual leave accrues under the NES throughout the year and from year to year.

A shift worker is entitled to an additional week of annual leave per year. Shift work is defined in your industrial instrument.

Taking annual leave

To take annual leave, an employee needs to request the time off from their employer. An employer will then need to decide whether to approve or reject their employee’s request.

An employer may be able to place an employee on annual leave if this is allowed in their industrial instrument. To put an employee on annual leave an employer will generally need to give their employee a specific period of notice before the leave is to be taken.

Most awards will also allow an employer to direct an employee to take paid annual leave in particular circumstances.

For example, if a site shuts down over Christmas the employer may be able to tell the employees to take paid annual leave for that period. This can also happen if an employee has accrued excessive annual leave.

Directing an employee to take annual leave must meet certain requirements and must be reasonable in all circumstances. If an employee does not have sufficient accrued annual leave for the period of a shutdown, the employee may be required to take leave without pay for the balance of the shutdown period.

Example: granting leave

Dean wants to take a week off to go Thailand but he only asks the week before.

Since Dean’s employer does not have enough other workers to complete the work scheduled, he is unable to grant the leave. Dean’s employer does not have to grant the leave.

Dean and his employer negotiate a later date that is convenient to them both.

Pay during annual leave

Annual leave is paid at an employee’s all-purpose rate of pay or base rate (if they don’t have an all-purpose rate). Most people in building and construction will be paid the all-purpose rate for their ordinary hours.

During a period of annual leave an employee’s wage may include an additional loading, known as annual leave loading. Employees and employers will need to check their industrial instrument to determine whether they are entitled to the annual leave loading.

Annual leave loading is paid as a percentage (usually 17.5%) on top of an employee’s normal all-purpose rate, whenever they take annual leave.

The purpose of leave loading is to compensate people who normally do jobs that can attract penalty rates and extra pay.

As a result they may be receiving less money when they are on annual leave compared to when they are working.

Cashing out annual leave

Some industrial instruments allow employees and employers to reach an agreement to cash out annual leave. Cashing out annual leave provisions of industrial instruments generally apply to employees who have accumulated large amounts of annual leave. Where an employee’s industrial instrument allows annual leave to be cashed out the NES permits:

  • employees to be paid out (‘cash out’) their entitlement via wages without them having to take leave
  • employers to reduce their annual leave liabilities.

In order to cash out annual leave, all parties must comply with the terms and conditions of their industrial instrument. If the employee is not covered by an industrial instrument the employer and employee may make an agreement to cash out annual leave so long as that agreement complies with the following requirements of s 94 of the FW Act.

  • each agreement to cash out leave must be a separate agreement in writing
  • the agreement must not result in the employee’s remaining accrued entitlement to paid annual leave being less than 4 weeks
  • the employer must pay the employee at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has foregone.