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Annual leave

What is unlimited annual leave?

Unlimited annual leave is a benefit offered by some businesses to attract and retain talent and help their employees achieve a healthy work-life balance. But what are the practical implications of implementing an unlimited annual leave policy?

In this guide, we’ll consider the pros and cons of offering your staff unlimited leave, so you can start attracting and retaining the best talent for your business. 

Is There A Limit To Leave?

According to the Fair Work Act, employees in Australia have the right to receive paid annual leave. Typically, full-time employees who work standard hours are entitled to four weeks of annual paid leave per year. This means that you are obligated to provide at least the minimum legal requirement for annual leave to your employees. However, you have the option to offer more if you choose - an enhanced holiday entitlement. 

You can also opt for an unlimited leave policy which allows all employees, regardless of their position, to take as much paid time off as they wish starting from their first day of employment. With unlimited leave policies, employees have the freedom to request any number of fully paid annual leave days throughout the year.

The Pros of Unlimited Leave

Let’s take a look at why offering unlimited leave is a worthwhile perk that can help you attract top talent to your business. 

1. Reduce leave liabilities

In Australia, employees are entitled to 4 weeks of paid annual leave. If some of this leave is not used, then that remainder can be carried over into the next year. When an employee leaves your business, you would also be required to pay out any unused leave, which means leave is a liability for your business. 

Unlimited annual leave can help reduce this liability since employees would not have to worry about saving or accruing leave. Thus, they would be more inclined to use their entitled leave freely, helping your business reduce its leave liability. 

2. Attracting And Retaining Top Talent

Unlimited annual leave is a perk that can help attract the best talent to your business because it gives employees the flexibility to take leave when it suits their needs without having to worry about how much leave they have left. 

3. Work-Life Balance

With employees having the option to take leave when they need it, it gives them the flexibility needed to fit in family or other personal commitments around their schedules.

The Cons of Unlimited Leave

Offering unlimited leave does have its downsides for your business. Let’s take a look at why you may want to avoid offering this to your employees. 

1. Lack of Clear Guidelines

By not setting a number for the maximum amount of annual leave allowed, it creates uncertainty for employees on what is considered acceptable, placing a burden on each individual to make their own judgment. As a result, they may find it difficult to fully enjoy their relaxation time due to concerns about how their colleagues perceive their unrestricted use of leave.

2. Abuse of the System

An unlimited annual leave policy can be abused by employees who choose to take advantage of the policy. This could lead to employees taking more leave than is reasonable. When creating an unlimited leave policy, it is important to ensure that the guidelines and policies in place are clear and can prevent such abuse of the system.

3. Staff Not Taking Leave

For some, the choice of taking endless time off work may be more overwhelming than empowering. Some employees may take less leave not more. If an employee is a naturally hard worker, who is passionate about their work and professionally ambitious, they may easily fall into the trap of taking less leave.

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Considerations When Implementing Unlimited Leave

There are many strains that can come with an unlimited leave policy, not only from a practical point of view but also from an HR perspective.

For line managers and HR personnel dealing with leave requests, the decision-making process can be unnecessarily tricky and awkward, not least when they are forced to refuse requests because of business needs. 

Refusals can also create conflict, both between the person on the receiving end of the leave refusal and the person tasked with making this decision. Equally, if an employee is committed to the success of the business, as well as their own career progression, they may get into an unhealthy habit of taking less leave.

Alternatives to Unlimited Annual Leave

If you’ve decided that unlimited annual leave isn’t right for your business but you still want to offer your current and future employees attractive leave perks, you could try the following alternatives: 

Floating Annual Leave

A floating holiday is a customisable and flexible leave benefit that allows your employees to choose when they take a day off. Floating holidays can serve many purposes. They can be used as substitutes for certain public holidays, personalised celebrations, or to accommodate religious or cultural events that may not align with your business's usual calendar.

Forced Annual Leave

In Australia, you are allowed force annual leave in two situations, business closure and excessive leave accumulation. Business closure means you can force annual leave when your business is closed for the holiday season and other approved instances depending on an employee's award or agreement. Excessive leave accumulated is defined as 8 or more weeks of accrued leave (10 weeks for shift workers). 

Quarterly Leave Requirements

Provide guidelines encouraging employees to take at least 5 leave days each quarter. This ensures that annual leave is distributed throughout the year, preventing extended periods without a break and promoting overall work-life balance.

How QuickBooks Can Help

Managing your employees’ annual leave is a headache, whether you choose to offer unlimited holidays or not. Luckily, with QuickBooks, you can create customised policies that meet your business needs and comply with labour laws. Track accrued annual leave, leave balances, and view all leave histories to help you make your approval decisions. 

Sign up for QuickBooks Online with a free 30-day trial to help you manage your leave entitlements for the upcoming holiday season. 

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