For employees, annual leave provides paid time off for rest and personal pursuits β helping to maintain balance and well-being. For employers, it keeps your business compliant with employment laws while supporting a productive workforce.Β
Whether you're an employer managing payroll or an employee checking your entitlements, this article will help you understand your rights, obligations, and how to calculate annual leave.
Annual leave, also known as holiday leave, is paid time off that employees build up based on their hours worked. To comply with Fair Work regulations, employers must accurately track and calculate holiday leave accrual for their employees.Β
In Australia, the National Employment Standards (NES) establishes the minimum entitlements for all employees β including annual leave. Under these standards, full-time and part-time employees in Australia are entitled to at least four weeks of paid annual leave per year.
Annual leave accrues based on an employeeβs ordinary hours of work. Weβll run through some formulas to help you work out leave entitlements, but you can also use the Fair Work Leave Calculator for precise numbers.
So, how is annual leave calculated?Β
For full-timers, the maths is pretty straightforward:
Formula: 4 weeks Γ ordinary weekly hours = total annual leave hours per year.
So, if an employee works a standard 38-hour week, they would accrue 152 hours of annual leave per year: 4 weeks Γ 38 hours per week = 152 hours of annual leave.
For part-time employees, holiday leave accrual is proportionate to their working hours. Hereβs how to work out annual leave for part-timers:
Formula: (part-time hours per week Γ· 38) Γ 152 hours = total annual leave hours per year.
For example, a part-time employee working 20 hours per week earns 80 hours of annual leave per year: (20 hours Γ· 38) Γ 152 hours = 80 hours of annual leave per year
If your employees have irregular hours, it can be tricky to calculate how much annual leave per year is accrued. Here's what to do:
Remember, this only applies for part-time employees β casuals donβt accrue annual leave.
Let's dive into what the National Employment Standards (NES) actually say about annual leave in Australia. These standards are the baseline rules that apply to employees across the country, setting out the minimum entitlements everyone should receive.
Under the NES, full-time employees are entitled to four weeks (20 days) of paid annual leave per year. Here's what you need to know:
Let's say James works 38 hours per week (the standard full-time hours in Australia):
So if James has been working for 6 months, he would have accrued approximately 76 hours (or 10 days) of annual leave.
When it comes to how to work out annual leave for your part-timers, the NES uses pro-rata entitlements to keep things fair. This means your employeeβs leave is based on how many hours they work compared to a full-timer:
Let's say Taylor works 20 hours per week:
This means after working for 9 months, Taylor would have accrued about 60 hours (or 3 weeks based on his 20-hour work week) of annual leave.
Casual employees don't receive paid annual leave under the NES. Instead, they get casual loading, which is typically 25% earnings on top of the base pay rate. This loading is meant to compensate for benefits like annual leave that permanent employees receive.
If you want to know more about employing casuals and their rights, check out our comprehensive Casual Employees Guide.
When your employees take annual leave, you need to pay them at their base rate for the ordinary hours they would've worked. But there's a bit more to it than that.
The exact amount you pay depends on your employment agreement, award or enterprise agreement. Some employees might also be entitled to leave loading (often an extra 17.5%) on top of their normal pay while on leave.
Any unused annual leave must be paid out in their final pay when an employee leaves your business. This is calculated at their current base rate, even if their pay has increased since they accrued the leave.
Need help managing payroll and leave calculations for your team? QuickBooks Payroll can make the whole process smoother.
When working out how to compute annual leave payments, it's important to know whatβs included and what isnβt. Some awards and agreements might have additional rules on top of the NES standards. In this section, weβll break down some of the most common inclusions and exclusions:
When an employee finishes up at your business, any unused annual leave in Australia has to be paid out. Letβs unpack some of the details:
This is one of those times when understanding how to calculate holiday leave becomes incredibly important β you want to make sure you're getting the numbers right.
Businesses must keep accurate records of annual leave accrual and usage. This includes:
You must keep proper records to comply with Fair Work regulations. Plus, it helps to avoid disputes over leave entitlements.
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