Annual leave accrual

What is Annual Leave Accrual?

Annual leave accrual refers to the process by which an employee's entitlement to paid annual leave builds up over time. In Australia, under the National Employment Standards (NES), full-time and part-time employees accumulate four weeks of annual leave per year, based on their ordinary hours of work.

This leave doesn’t become available all at once. Instead, it accrues progressively throughout the year. The accrual process ensures that leave entitlements are earned proportionally based on the amount of time an employee works.

Why Accrual Matters

Proper accrual calculations are essential for both employees and employers:

• Employees can clearly see what leave they’ve earned.
• Employers stay compliant and avoid underpayment or disputes.
• Accurate accrual data ensures clean record-keeping and streamlined payroll.

Incorrect accrual calculations can lead to complex backpay liabilities and penalties. That’s why many businesses choose HR software that automates this process.

How is Annual Leave Accrued?

Annual leave accrues:

• From the employee’s first day of work.
• Based on ordinary hours, not including overtime.
• On a pro-rata basis for part-time employees.
• During paid leave, such as sick leave or public holidays.
• Not during unpaid leave, including unpaid parental leave.

The standard accrual rate for a full-time employee working 38 hours per week is 2.923 hours of leave per week. This equates to 152 hours (or 4 weeks) over a 12-month period.

For part-time employees, leave is accrued at the same rate but proportionally to hours worked.

Accrual During Leave or Absences

Employees will continue to accrue annual leave:

• While on paid annual leave.
• While on paid personal or sick leave.
• While on community service leave.
• During long service leave (if it’s paid).

Employees will not accrue annual leave:

• During unpaid leave.
• While on unpaid parental leave.
• If they are not actively employed (e.g. casuals between shifts).

How to Track Annual Leave Accrual

Employers are legally required to track leave accruals. This means:

• Recording leave balances on payslips.
• Updating balances in payroll software.
• Maintaining historical accrual records.

Under the Fair Work Act, payslips must show an employee’s leave balance, unless the employee is casual and not entitled to leave.

How Microkeeper Helps

Microkeeper makes tracking and managing leave accruals simple:

• Accruals are automatically calculated based on rostered and worked hours.
• Leave balances update in real time.
• Employees can view their leave accruals in their console.
• Leave requests automatically reflect available balances.
• Managers receive alerts when staff exceed limits or request leave they haven’t accrued.

Learn more about our Leave Management features.

Common Questions

1. Can leave accrue beyond 4 weeks?

‍Yes. If unused, leave continues to accumulate indefinitely unless a limit is imposed by an award or agreement.

2. Can an employer reset leave balances annually?

‍No. Leave balances must not be reset. They must carry over each year.

3. How is leave handled when an employee resigns?

‍Any unused accrued leave must be paid out in full upon termination, using the employee’s current base rate of pay.

4. Do casual employees accrue leave?

‍Generally no. Casuals are not entitled to annual leave, as they receive a higher hourly rate (casual loading) in lieu of leave.

Link to Official Guidance

‍Refer to the Fair Work Ombudsman’s annual leave page for specific rules and examples.

Final Thoughts

Annual leave accrual is a core part of employee entitlements in Australia. Ensuring it’s calculated, tracked, and reported correctly protects both your team and your business.

With payroll-integrated tools like Microkeeper, you can confidently automate leave accruals and stay compliant without extra admin.

_{Disclaimer: This glossary entry is for general informational purposes only and does notconstitute legal or financial advice. For official guidance, always refer to the ATO or consult a registered tax agent.}