Under the National Employment Standards, all permanent employees, excluding shiftworkers as defined in the relevant Modern Award, enterprise agreement or Division 2B State instrument, are entitled to four weeks’ paid annual leave for each year of service.  Annual leave accrues progressively according to an employee’s ordinary hours of work and is cumulative from year to year.  Part-time employees accrue annual leave on a pro rata basis.

An employee meeting the definition of a shiftworker in the relevant Modern Award, enterprise agreement or Division 2B State instrument is entitled to one additional week of annual leave per year. As the definition of a shiftworker differs significantly between different Modern Awards and enterprise agreements, it is essential that the definition in the relevant Modern Award and/or enterprise agreement is referred to, to determine an employee’s annual leave entitlement.

While on annual leave, the employee is entitled to be paid at the base rate of pay which does not include incentive-based payments and bonuses, loadings, monetary allowances, overtime or penalty rates or any other separately identifiable amounts.  However, an employee covered by a Modern Award, enterprise agreement or Division 2B state instrument may be entitled to annual leave loading in addition to the base rate of pay while being on paid annual leave.  These may also prescribe that employees while on annual leave are entitled to either the annual leave loading or the applicable penalty rates, shift loading or similar, whichever is greater.

Annual leave may be cashed-out by employees covered by a Modern Award, enterprise agreement or Division 2B State instrument where these instruments provides for an entitlement to do so.  Alternatively, award-free employees may cash out annual leave by mutual agreement between the employer and the employee.

An employer cannot force an employee to cash-out their annual leave or exert undue influence or undue pressure on an employee to do so.  Fair Work Inspectors can investigate employers to ensure that employees genuinely consent to the cashing-out of annual leave.

An employer may require an employee covered by a Modern Award, enterprise agreement or Division 2B State instrument to take paid annual leave only if they include terms to this effect and if the request is reasonable.  Therefore, employees covered by a Modern Award, enterprise agreement or Division 2B State instrument which does not contain a term that enables the employer to direct the employees to take annual leave during annual shutdowns, for instance between Christmas and New Year, cannot be directed to take annual leave.

Neither the Federal Fair Work Act 2009 nor the majority of Modern Awards define what would be reasonable in relation to requesting employees to take annual leave. However, the following factors may be considered by employers and will be considered by Fair Work Australia in assessing whether a request to take annual leave is reasonable:

  • the needs of both the employee and the employer’s business;
  • any agreed arrangement with the employee;
  • the custom and practice in the business;
  • the timing of the requirement or direction to take leave; and
  • the reasonableness of the period of notice given to the employee to take leave.

To ensure your annual leave policy is up-to-date, purchase Business SA’s HR Policy Package which has been updated to reflect the new award system and minimum employment entitlements. For more information, visit: www.business-sa.com or call 08 8300 0113.

Adelaide Office

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136 Greenhill Road Unley
South Australia 5061

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