What is Annual Leave

Annual leave entitlements differ between the two Australian workplace relations systems, please refer to the relevant section of this guide that applies to your workplace.


The information below applies to workplaces under the National system

How much annual leave does an employee get?
The NES prescribes that all national system employees (except casual employees) get paid annual leave based on their ordinary hours of work. An annual leave entitlement that comes from an award or agreement may be different, but cannot be less than the NES entitlement described below:

An employee is entitled to:
  • Four weeks annual leave for each 12 months of service
  • Five weeks annual leave for some shift workers for each 12 months of service. To qualify for the shift work entitlement of five weeks annual leave, the employee must either be classified as a shift worker under an award or agreement, or if not covered by an award or agreement, they must meet all of the following criteria:
    • They are employed in an enterprise where shifts are continuously rostered 24 hours a day for seven days a week,
    • They are regularly rostered to work those shifts,
    • They regularly work on Sundays and public holidays.
Terms within an award, agreement or employment contract that provides for less than the NES will have no effect. Awards and agreements may provide for additional annual leave entitlements over and above those provided in the NES.

Calculating annual leave
Under the NES, an employee’s entitlement to annual leave accrues progressively during a year of service according to their ordinary hours of work and accumulates year to year.
To calculate an employee’s annual leave accrual add up the total number of ordinary hours worked by the employee and then divide this number by 13. This calculation does not factor in the extra week of annual leave for shift workers.
We have calculated some accrual rates for full time employees (those that work 38 hours per week).


Accrual based on a 38hr week and does not take into account the extra week of annual leave available for shift workers

By Hour                           0.0769 hours         0.0101 days
By Week                       2.9231 hours         0.3846 days
By Month                      2.6667 hours         1.6667 days
By Year                         152 hours               20 days

How much is the employee paid?
The employer must pay annual leave at the employee's base rate of pay for their ordinary hours during the period of leave. This doesn't include separate entitlements such as incentive-based payments and bonuses, loadings, monetary allowances, overtime or penalty rates.

Most Awards and agreements provide employees with an Annual Leave Loading.  This loading is only paid during a period of annual leave.
On termination of employment an employer must pay an employee in respect of any accrued untaken paid annual leave. Annual leave loading is generally paid on accrued annual leave taken on termination while some awards may specifically exclude the annual leave loading.

Taking annual leave
An employee can take paid annual leave when their employer has agreed to their request for leave. The employer must not unreasonably refuse to agree to a request to take annual leave.
There's no minimum or maximum amount of accrued annual leave that must be taken at a time.
The HR Advisory Service recommends that employers implement a policy on how employees should apply for annual leave e.g. by completing a leave application form. Members can access a sample template Leave Application form from the HR Advisory Service.

What happens if a public holiday occurs during annual leave?
Public holidays are not counted as annual leave days and therefore are not deducted from the employee’s accrued annual leave balance, if the employee would normally have been rostered to work on a day declared as a public holiday.

What if an employee is ill or injured or is required to provide care to an ill or injured family/household member whilst on a period of annual leave?
The NES provides that when an employee is on a period of annual leave and they are ill or injured, or caring for a family or household member who is ill or injured, then the employee is to be taken to be on personal or carers leave as opposed to annual leave.
The employee would still need to comply with the notice and evidence requirements for personal/carers leave. Please refer to the Personal/Carers Leave guide for information on notice and evidence requirements for this type of leave.

What if an employee on a period of annual leave commences community service leave?
If an employee is on a period of annual leave and commences Community Service Leave, then the employee is taken to no longer be on Annual Leave but on Community Service Leave.
The employee would still need to comply with the notice and evidence requirements for Community Service Leave. Please refer to the Community Service Leave guide for information on notice and evidence requirements for this type of leave.

Can annual leave be cashed out?
The NES does allow for cashing out of accrued annual leave when the following strict provisions are met;

Award/Agreement covered employees
Cashing out of accrued annual leave is permitted for award and agreement covered employees if all of the following criteria apply:
  • The award or agreement allows the practice,
  • There is a separate agreement in writing on each occasion,
  • The employee retains a minimum balance of at least four weeks of annual leave,
  • The employee is paid at least the full amount that would have been payable had the employee taken the leave they have cashed out.
Note: Please check the specific annual leave cashing out requirements that may apply under the employee’s relevant award or agreement.

Award/Agreement free employees
Cashing out of accrued annual leave is permitted for employees not covered by an award or agreement, if all of the following criteria apply:
  • There is a separate agreement in writing on each occasion,
  • The employee retains a minimum balance of at least four weeks of annual leave,
  • The employee is paid at least the full amount that would have been payable had the employee taken the leave they have cashed out. It is unlawful for an employer to force (or try to force) an employee to make (or not make) an agreement to cash out annual leave under a term included in an award or agreement.

Can an employee be directed to take Annual Leave?
The NES does allow employers to direct employees to take accrued annual leave if the following strict provisions are met;

Award/Agreement covered employees
An employer can direct employees to take accrued annual leave for employees covered by an award or agreement if all of the following criteria apply:
  • The award or agreement allows the practice through a specific clause relating to a shut-down period.
Note: Please check the specific annual leave directive requirements that may apply under the employee’s relevant award or agreement.

Award/Agreement free employees
An employer can direct an award or agreement free employee to take accrued annual leave in the following circumstances:
  • The Employee has accrued an excessive amount of paid annual leave (generally eight or more weeks of accrued paid annual leave is considered to be excessive).
  • The employer’s enterprise is being shut down for a period (for example, between Christmas and New Year) and the employee has been made aware that they will be required to take annual leave either through the practice policies or it is in their contract of employment.
Is accrued annual leave paid out on a transfer of employment?
A ‘transfer of employment’ occurs when an employee moves from one employer (the old employer) to another employer (the new employer) within three months of a transfer of business and performs substantially the same work for the new employer as they performed for the old employer.
A transfer of employment can also occur where an employee moves from one employer (the old employer) to another employer (the new employer) who is an associated entity of the old employer within three months of ending employment with the old employer.
A transfer of business can occur where one of the following connections between the old employer and the new employer exists:
  • A transfer of assets,
  • Outsourcing,
  • Insourcing,
  • Where the two employers are associated entities.
When there is a transfer of employment, an employee’s period of service with the old employer will generally count as service with the new employer and the employee will keep any annual leave balance they had accrued with the old employer.
However, where the employers are not associated entities, the new employer can decide not to recognise an employee’s service in relation to annual leave with the old employer. In such cases, the old employer will be required to pay out the employee’s untaken accrued annual leave.

The information below applies to workplaces under the State system

How much leave does an employee get?
Full time employees are entitled to four weeks of annual leave for each year of completed service, up to a maximum of 152 hours per year.
Part time employees are entitled to annual leave of four weeks per year but will be paid on a pro rata basis according to the number of hours you work. eg 20 part time hours per weeks equals 4 weeks annual leave entitlement paid at 20 hours per week.
Casual employees are not entitled to paid annual leave.
Employees who are paid solely by commission or piece rate and are not covered by a WA award are not entitled to paid annual leave.
An employee needs to have worked for 12 months before they are entitled to take annual leave unless their employer agrees thay can take the leave earlier.

Calculating annual leave
 Annual leave accrues and is calculated weekly based on how many weeks the employee has worked. Accrual is based on a 38hr week.

Each completed week of work             2.923 hours           .3846 days
Maximum per year                                    152 hours               20 days      

Annual leave is a cumulative entitlement, which means that any leave that is not taken can be carried over to the next year.

How much is the employee paid?
Annual leave is paid at the employee's current rate of pay when an employee takes annual leave. In addition, some WA awards provide for payment of certain allowances and some penalty rates in certain circumstances while on annual leave.

Most WA Awards require annual leave loading (usually 17.5%) to be paid when an employee takes a period of paid annual leave. Employees who are award free do not receive annual leave loading unless it is specified in a contract of employment.

What if an employee becomes sick while on a period of annual leave?
Most WA awards do not allow employees to convert annual leave to sick leave. There are a few WA awards that will allow this in certain circumstances.
Employees who are award free do not have an entitlement to convert annual leave to sick leave.

Can annual leave be cashed out?
Award free employees can agree with their employer to cash out up to 50% of their annual leave, but only after they have worked for at least 12 months. Each agreement should be recorded in writing and kept on record. An offer of employment that requires an employee to trade away their annual leave entitlements or the cashing out of leave cannot be.

Note: Please check the specific annual leave cashing out requirements that may apply under the employee's relevant Western Australia State Award or Aggreement.
 

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This document does not constitute human resource or legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should contact the HR Help Desk or seek professional advice before acting or relying on any of the content. © Wentworth Advantage Pty Ltd 2017