Annual leave is a type of paid time off granted to employees so they can rest, recharge, or attend to personal matters. In Australia, under the National Employment Standards (NES), full-time and part-time employees are entitled to four weeks of paid annual leave per year, based on their ordinary hours of work. This entitlement builds progressively throughout the year and accumulates year to year if unused.
Providing regular annual leave isn't just a legal requirement — it's also vital for long-term employee well-being, retention, and productivity. Encouraging employees to take leave helps prevent burnout, improve morale, and maintain a healthy work culture.
Employers must keep accurate records of leave balances and usage to remain compliant with Fair Work obligations. Failure to do so can result in underpayment disputes, audits, or even legal action.
Annual leave begins accruing from the first day of employment. It accrues:
For award and agreement-free employees, the accrual is typically calculated as 2.923 hours for every 38-hour week worked.
Employees must request annual leave, and employers must not unreasonably refuse a request. However, employers can set rules around when leave is taken, especially in seasonal industries or peak periods.
Common leave request rules may include:
Employers can also direct an employee to take annual leave if:
Some modern awards and enterprise agreements include annual leave loading, usually 17.5%, to compensate for lost overtime or penalty rates during leave.
Check the applicable modern award via Fair Work’s Award Finder to confirm your obligations.
Microkeeper’s HR and payroll software helps automate annual leave management:
This streamlines compliance while reducing admin and payroll errors.
Explore our Leave Management features.
Yes, but only under limited circumstances. The NES allows cashing out of annual leave if:
No. Unused annual leave continues to accumulate year-to-year. It must be paid out on termination.
Employers can direct leave if their business shuts down over Christmas/New Year, provided this is covered in an agreement or award.
Annual leave is a core entitlement, but managing it well also drives retention, reduces burnout, and improves your company culture. By leveraging tools like Microkeeper, you can stay compliant while supporting a healthier, more productive team.
This content is general in nature and does not constitute legal or financial advice. For specific guidance, please consult Fair Work or a registered employment adviser.
