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Guide to Forced Annual Leave

January 4, 2024

When the year draws to a close your business may want to take a break for the holidays, this break is known as a shutdown. A shutdown can be tricky for your business especially when considering the need to manage your employees’ annual leave entitlements. This guide will provide you with some tips on how to handle this situation fairly while also meeting the needs of your business.

This guide will explore the concept of forced annual leave and the circumstances in which you can direct an employee to use their annual leave.

What is a Shutdown?

A shutdown, or a close-down, is the temporary closure of a business during a slower period of the year, like Christmas and New Year. Whether or not you can direct your employees to take annual leave during a shutdown depends on their employment awards or agreements. We will discuss this below.

Understanding Annual Leave

In Australia under the National Employment Standards (NES), employees usually have the right to a minimum of four weeks of paid annual leave per year or five weeks for employees who do shift work.

Throughout the year, annual leave gradually builds up as employees work more hours. Accumulation of annual leave starts from the first day of employment, including the probation period.

Annual leave will also accumulate while your employee is on paid leave, jury duty and long service leave. However, if they took unpaid annual leave, unpaid sick leave or unpaid parental leave then leave does not build up while on those leaves.

Any unused leave generally carries over into the following year. When an employee has accumulated more than eight weeks of paid leave (or ten weeks for shift workers), it is typically considered excessive.

Watch this video from Fair Work to learn more:

Forced Annual Leave: When Can You Direct It?

As an employer, there are only certain circumstances where you have the authority to request an employee take their annual leave. These circumstances are:

Business Closure - If your business shuts down during the festive season, like Christmas and New Year, you have the ability to instruct employees to utilise their annual leave during this time. The specific guidelines on when and how you can enforce this depends on the relevant award or agreement.
Excessive Leave Accumulation - In cases where an employee has accumulated a large amount of annual leave (where it can be considered excessive), you may have the option to direct them to take leave. This is often applicable when an employee has accrued more than eight weeks of paid annual leave (or ten weeks for shift workers).

How to Approach Forced Annual Leave

While you do have the authority to require an employee to take annual leave in some situations, it's important to handle this matter with sensitivity and thoughtfulness. Here’s how to broach the topic of forced annual leave:

1. Initiate a Conversation

Before resorting to enforcing leave, it's good to have a conversation with the employee. Discuss their excessive leave balance and try to understand the reasons behind it. Often, a friendly and open discussion can lead to mutual understanding and resolution.

2. Provide Written Instructions

If the conversation doesn't result in a satisfactory outcome and you need to proceed with enforcing annual leave, make sure to provide written instructions. This notice should clearly state the period during which the employee is required to take their leave.

3. Comply with Industry Regulations

Ensure that any directive regarding annual leave aligns with the rules laid out by Fair Work. This includes adhering to the required notice period and ensuring that the duration of the holiday aligns.

4. Consider Timing

The notice should state when the employee's leave should start. For example, within a minimum of eight weeks and a maximum of twelve months after the notice is provided.

5. Maintaining Consistency

Make sure that the instructions provided do not conflict with any other previously agreed-upon leave arrangements between you and your employee.

How QuickBooks Online Can Help with Forced Leave

Handling employee leave can be pretty overwhelming, especially during shutdowns and when dealing with excessive leave.

The good news is that QuickBooks cloud payroll software provides tools to help your business manage employee leave. Let's explore how QuickBooks can assist you:

On QuickBooks, you can add leave in advance from the Employee homepage

Select Payroll from the left-hand menu
Select the dropdown next to Manage Employees and select Create Requests
Select Employee and Leave Category
Select the First day of leave and Last day of leave
Tick whether or not you wish to Approve immediately
Select Save

For more information on setting up leave on QuickBooks view our learn and support page on managing leave.

Navigate Forced Leave with Care

Navigating forced annual leave management properly helps your business operations continue to run smoothly, even during shutdowns. Always approach the matter with open communication and fairness to maintain a collaborative employee-employer relationship.

To learn more about different types of leave read our guides to floating holiday and unlimited annual leave.

You can use QuickBooks Payroll to manage and create leave requests for your employees. Sign up for QuickBooks Online with a free 30-day trial today.

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