This is Part 1 of a two part series about the basis of annual leave entitlements. We thought it would be useful to give some general information about an area of HR/employment law that seems so simple…yet can be confusing (and get you in strife) if you don’t know the basics.

Q: Are all my employees entitled to paid annual leave?  If so, what is the minimum amount of annual leave my employees are entitled to?

A: All permanent National System Employees are entitled to paid annual leave.  Minimum annual leave entitlements are found in the following instruments:

  • The National Employment Standards (NES);
  • An applicable Award; or
  • An applicable Enterprise Agreement.

Unless an industrial instrument provides for a greater amount of annual leave, the minimum annual leave entitlements for all permanent National System Employees is as outlined in the NES (section 87 of the Fair Work Act 2009), being:

  • 4 weeks of paid annual leave per year; or
  • 5 weeks of paid annual leave per year for shift workers.

These entitlements are pro-rataed for part-time employees.

Awards and Enterprise Agreements may provide for greater minimum entitlements. It is very important to check the relevant industrial instrument to confirm the minimum entitlement to annual leave.

Employment contracts can of course provide for a greater amount of leave, however a contract cannot lawfully reduce the minimum entitlement outlined in an Award, Enterprise Agreement or under the NES.

Q: What do I have to pay the employee while he/she is on annual leave?

A: Annual leave is generally paid at the employee’s base rate of pay.  The base rate does not include overtime, penalties, allowances or bonuses. Employers should check however to determine whether a higher rate has been agreed to under an Enterprise Agreement or in the contract of employment.  Employers must also determine whether leave loading is payable by checking the applicable industrial instrument.

On termination of employment the employer must pay an employee all accrued and unused annual leave as if the employee were taking the leave. Therefore, if loading is payable if the employee were to take the leave, loading is also payable on the amount of leave paid out on termination of employment.

Q: Are there any rules when an employee takes annual leave?

A: Awards and Enterprise Agreements can set out rules for taking annual leave may contain a direction to take (for example at the end of the year if the employers operations close down for a period) and for the granting of annual leave.

An employer and an Award/Enterprise Agreement free employee may agree on when and how annual leave is taken (e.g. If it is for a fixed period, in advance etc…)

To be continued…

Make sure to keep a look out next week for the Annual Leave Series: the Basics Part 2 (the questions get a little trickier!).