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Annual leave is a big part of running a business in Australia. In addition to annual leave, employees may also be entitled to other types of leave, such as sick and carer’s leave, which is essential for understanding overall leave entitlements.
What are Annual Leave Entitlements in Australia?
Who is Eligible?
Under the NES, full-time workers and employees get 4 weeks (20 days) of annual leave per year based on a standard 38-hour workweek. Part-time employees get leave on a pro-rata basis relative to their hours worked. Casual employees don’t get annual leave but get a higher hourly rate known as casual loading to compensate for this.
Shift workers may be entitled to an extra week of annual leave, making it 5 weeks. And enterprise agreements or awards can provide more entitlements than the NES, so it’s best to check these for any additional provisions.
Accrual Rules
Annual leave accrues progressively based on hours worked and continues to accrue while employees are on paid leave, such as annual or sick leave. This means employees will accumulate their entitled leave even when they’re not actively working, including annual leave, sick and carer's leave.
How to Calculate Annual Leave Accruals in Australia
| Employment Type | Formula |
|---|---|
| Full-Time | 4×38/52=2.923 4×38/52=2.923 hours per week |
| Part-Time | 4×Ordinary hours per week/52 4×Ordinary hours per week/52 |
| Varying Hours | 4×Average weekly hours/52 4×Average weekly hours/52 |
The calculation also requires knowing the employee's start and end dates to determine the total period of employment. For a broader view of how these calculations fit into overall entitlements, see our comprehensive guide to annual leave in Australia.
Example:
Jane is a full-time employee (38 hours/week) and wants to know how much annual leave she has accumulated over 26 weeks:
Annual Leave = 26×2.923=75.998
Watch: Business Owners — You’ve Been Calculating Annual Leave Wrong
Annual leave accruals are one of the most common areas for payroll mistakes. In this video from our Payroll 101 Series, we cover the three errors Australian businesses make most often — and how to avoid them.
Tools to Help You Calculate Annual Leave
- Stop second-guessing entitlements. Download our free calculator to get instant, accurate annual leave accruals for your team.Download FREE Annual Leave Calculation Worksheet
- Payroll Software: Automates accrual tracking and compliance.
Using these tools ensures that you are following the best practice method for calculating leave entitlements accurately.
Leave Loading and Variations
Leave loading is an additional payment made to employees on top of their regular pay during annual leave. It is designed to compensate for the lack of overtime and penalty rates during leave.
The leave loading amount varies depending on the industry, award, or employment contract. Some modern awards or employment contracts may include a leave loading, while others may not.
In Australia, the leave loading amount is typically 17.5% of the employee’s regular pay. However, this can vary depending on the specific award or employment contract. It is essential to check the relevant award or employment contract to determine the leave loading amount. This also applies when calculating leave loading on termination, since employees are entitled to be paid out unused annual leave when they leave your business.
Leave loading is usually paid on top of the employee’s regular pay during annual leave. For example, if an employee earns $30 per hour and is entitled to 4 weeks of annual leave, their total annual leave entitlement would be:
- 4 weeks x 38 hours per week = 152 hours
- 152 hours x $30 per hour = $4,560
- Leave loading (17.5% of $4,560) = $798
- Total annual leave entitlement = $4,560 + $798 = $5,358
Managing Unused Annual Leave
Unused annual leave can be a significant issue for employers and employees. In Australia, employees are entitled to be paid out for their accrued but unused annual leave when they leave their employment.
However, employers can also manage unused annual leave by allowing employees to cash out some of their leave balance or by requiring employees to take annual leave before it accrues.
Employers can also implement policies to manage unused annual leave, such as:
- Requiring employees to take annual leave within a certain timeframe
- Allowing employees to cash out some of their leave balance
- Providing incentives for employees to take annual leave
- Employers need to communicate clearly with their employees about their annual leave entitlements and usage to avoid misunderstandings and disputes.
It’s also important to prevent negative leave balances from building up in your payroll system, which can happen if employees take leave before it has fully accrued. Learn more about managing negative leave balances in a pay run.
