Annual leave is more than just a workplace entitlement. When managed well, it can improve employee wellbeing, boost productivity, reduce burnout and help organisations avoid the financial burden of large leave liabilities. Yet many employers find themselves dealing with employees who rarely take leave and accumulate significant balances over time.
The key is to create a workplace culture where taking annual leave is encouraged, planned and supported. By helping employees step away from work to rest and recharge, businesses can benefit from a healthier, more engaged workforce while maintaining operational continuity.
Many employees continue working without taking adequate breaks for a variety of reasons. They may feel indispensable to the business, worry about falling behind on workload or believe taking time off could be viewed negatively by management. Some may intentionally build up a large leave balance, while others simply never get around to organising a break from work.
Whatever the reason, excessive leave accruals can create challenges for both employees and employers. Employees miss valuable rest and recovery time, while businesses carry a growing financial liability on their balance sheet.
Don't wait until leave balances become excessive. Regular conversations about upcoming leave can help employees plan time away from work and normalise the idea that annual leave is both expected and beneficial.
Tip: Review leave balances periodically and proactively discuss leave plans with employees who are accumulating significant balances.
Employees are more likely to take leave when they know their workload will be managed and they won't return to an overwhelming backlog of work.
Tip: Develop coverage plans, train other team members on other tasks to appropriately manage employee absences and encourage managers to support employees before, during, and after periods of leave.
A well written leave policy provides clarity for everyone. It should explain leave entitlements, how leave requests are made and approved, circumstances where leave may be refused and expectations regarding regular leave-taking.
Tip: Review your leave policy annually to ensure it remains current and reflects your operational needs and legal obligations.
Many organisations successfully manage leave by introducing leave rosters or requesting employees nominate leave periods well in advance. This allows businesses to plan staffing requirements and reduce clashes during peak periods.
Tip: Ask employees to submit anticipated leave dates at the beginning of the year or well in advance, particularly around school holidays and Christmas.
Some employees want to stockpile leave. This is not a good outcome for the employee (who does not get any recovery time from work) or the employer (who is burdened with an excessive leave liability). Under the National Employment Standards (NES), an employer can give award/agreement-free employees notice to take excessive accumulated annual leave in certain circumstances if the requirement is reasonable.
Modern awards and enterprise agreements can also permit an employer to require an employee to take excessive accrued leave. Under most awards, employees can be directed to take annual leave if they have at least 8 weeks accrued (or 10 weeks for a shiftworker). Generally, directing an employee to take annual leave is subject to particular conditions in the award. For example, an employer can only direct an employee to take annual leave if they have not been able to agree about when the excess leave will be taken.
Tip: When an award applies it is important to check it first as excess annual leave rules can differ between instruments.
An annual shutdown is a temporary closure of all or part of a business during which employees are directed to take annual leave. Many businesses plan for an annual shutdown over the Christmas and New Year period where it aligns a seasonal dip in customer demand and a natural desire among employees to spend time with family and friends.
Employees that are not covered by a modern award or enterprise agreement are subject to the NES provisions on directing annual leave. Most modern awards include the model clause that allows employers to direct employees to take annual leave during a shutdown if:
Tip: Before choosing implementing a shutdown, employers need to consider the National Employment Standards (NES) and relevant industrial instruments which regulate how and when employees can be directed to take leave.
A Notice of Annual Shutdown Letter is available to assist Australian Industry Group members when providing notice of a shutdown.
Most leave requests can be accommodated with proper planning, but sometimes business needs require a request to be declined. Where this occurs, employers should ensure the decision is reasonable, based on genuine operational requirements and communicated clearly.
Rather than simply rejecting a request, managers should discuss alternative dates and work collaboratively with the employee to find a suitable solution.
Tip: Always document leave approvals and refusals, including the reasons for any decision, to maintain consistency and transparency.
Knowing your obligations as an employer, as well as communicating employee responsibilities, is essential in ensuring that the various forms of leave available to employees is managed effectively.
Our Managing Leave Handbook provides helpful and practical information on how to manage all the different forms of leave in the workplace and explains the interaction of the NES with modern awards, enterprise agreements, contracts and any relevant state legislation.
The accompanying updating subscription for this publication makes sure you stay up to date when legislative changes or case law developments occur. All purchases currently receive a complimentary subscription for 12 months from the purchase date.
Don't wait, order now and approach leave management with confidence.
Effective annual leave management benefits everyone. Employees receive the rest and recovery they need to perform at their best, while employers reduce leave liabilities, improve workforce wellbeing and maintain business continuity.
By encouraging regular leave, planning ahead, and implementing clear workplace policies, businesses can create a healthier and more productive workplace for the long term.
For assistance with your workplace matters, members of Australian Industry Group can contact us or call our Workplace Advice Line on 1300 55 66 77 for further information.
Our Managing Leave Handbook is an essential and practical guide that will help all organisations to successfully manage the various types of leave available to employees.
Clinton is the Publications Manager at the Australian Industry Group.
He is responsible for a number of key services including Annotated Modern Awards, Workplace Relations Handbooks and the management of Ai Group’s HR and Health & Safety Resource Centres.
Clinton has a master's in Employment Relations and previously held advisory roles with the Workplace Authority and Department of Employment and Workplace Relations.
