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.
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.
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.
| 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.
Using these tools ensures that you are following the best practice method for calculating leave entitlements accurately.
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:
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:
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.
Part-time and irregular-hours employees are entitled to annual leave, but their entitlements may vary depending on their work hours. In Australia, part-time employees are entitled to 4 weeks of annual leave per year, based on their ordinary work hours.
For part-time employees, the annual leave entitlement is calculated as follows:
4 weeks x number of hours worked per week = total annual leave entitlement
For example, if a part-time employee works 20 hours per week, their annual leave entitlement would be based on these worked hours:
4 weeks x 20 hours per week = 80 hours
Irregular-hours employees, such as casual employees, may not be entitled to annual leave. However, some modern awards or employment contracts may provide for annual leave entitlements for irregular-hours employees.
Industry awards and agreements can provide for additional annual leave entitlements for employees. In Australia, industry awards and agreements can provide for more generous annual leave entitlements than the National Employment Standards (NES).
Employers must ensure that they comply with the relevant industry award or agreement when calculating annual leave entitlements for their employees. Failure to comply with the relevant award or agreement can result in penalties and fines.
Watch: How to Process Leave Approvals in Employment Hero Payroll
Processing leave requests doesn’t need to be manual or time-consuming. In this short video, we show you how to approve requests, attach documents, and bulk-apply leave directly in your pay runs.
If you’re relying on spreadsheets to track entitlements, it’s easy to make mistakes. Pay Cat payroll automates accruals so you never risk underpayment.
Back to top
|
Years Worked |
Notice Period |
|
Less than 1 year |
1 week |
|
Between 1 and 3 years |
2 weeks |
|
Between 3 and 5 years |
3 weeks |
Annual leave loading is an extra payment, usually, 17.5% of base pay, made during annual leave in some awards or agreements. For example, if Sarah earns $30/hour and has 152 hours of leave accrued, her entitlement, including loading, would be:
Total = 152×30×(1+0.175)=6,456
Employers can deny requests if the employee doesn’t have enough accrued leave or if it would impact business operations. But any denial must be reasonable and fair.
On termination, employers must pay out any accrued annual leave regardless of the reason for leaving. This includes applying leave loading in some cases. See our guide to annual leave on termination for a full breakdown.
No, annual leave doesn’t accrue during unpaid periods like unpaid parental leave or extended unpaid absences. Accrual only occurs during paid employment or paid leave, such as compassionate leave.
Download the Free Annual Leave Calculator
Stop second-guessing entitlements. Use our free calculator to work out leave accruals instantly and accurately.
Explore More Leave Topics
Annual leave is just one piece of the picture. Employees may also be entitled to sick leave, long service leave, and other entitlements. Watch our full leave management playlist on YouTube for practical explanations and examples.
Simplify Payroll with Pay Cat
If you’re still tracking leave in spreadsheets, mistakes are inevitable. Pay Cat payroll automates leave accruals and modern award compliance - so you can focus on running your business with confidence.
Pay Cat are payroll specialists dedicated to helping Australian businesses simplify payroll and stay 100% compliant with modern awards. We configure payroll systems to automate award interpretation, apply the correct pay rates and allowances, and remove the risk of manual errors.
Want to see how it works in practice? Watch our intro video to learn how Pay Cat helps businesses like yours run payroll with confidence.
See how Pay Cat can simplify payroll for your business.