Under the Fair Work Act, employees are entitled to 20 days (or 4 weeks) annual leave per year. Sounds simple, doesn’t it? However, we receive many questions around ‘when’ and ‘how’ annual leave can be taken. So here are a few quick tips and suggestions for managing annual leave.
- Have an annual leave policy. A policy can be a simple document that defines how and when to apply for leave. It should spell out in advance the particular circumstances of your organisation, what notice needs to be provided and how overlapping applications will be managed.
- Check your award obligations. All awards have obligations on annual leave and many contain a 17.5% annual leave loading. If you don’t have an annual leave policy, check your award to identify the requirements of leave.
- You can decline an application. The Fair Work Act states than an employer will not ‘unreasonably decline’ an application for annual leave. This does not mean you can never decline an annual leave application. Rather it means if you need to decline an application it must be because you have a specific reason. For example, other employees will be already absent or it is a busy time of year.
- Don’t force people to take annual leave. Unless an employee has excessive annual leave accumulated (usually defined as more than 8 weeks) or you have notified your employees of a ‘shut down’, you can not require an employee to take annual leave. For example, where an employee has no accumulated paid personal leave remaining, an employer can not ‘take’ some annual leave to cover the absence.
- Employees can take cash instead of annual leave. Until May 2016, only a few employees could have their annual leave paid out to them, instead of taking the leave. However, the inclusion in all awards of a standard clause on this issue has increased employee access to this option. But please note, there are strict guidelines around this and consideration must still be given to ensuring employees have a good break and chance to rest from work.
- You can agree to an employee taking leave in advance. Also in May 2016, most awards were varied to allow an employer to allow an employee to take annual leave before it accrues. This is not an automatic entitlement, but one that must be mutually agreed to and documented clearly.
- Try and manage employee annual leave accrual. It is important from both a rest and balance sheet perspective that you encourage your employees to use their annual leave entitlement each year. There will be times and reasons for an employee to accumulate more leave, for example, to take an extended overseas holiday. However, keep a close watch on employee accrual of annual leave to ensure this does not become a liability in the future.