Calculating annual leave
In Australia, annual leave is an entitlement provided to employees under the National Employment Standards (NES) of the Fair Work Act 2009. The annual leave entitlement is typically based on the number of ordinary hours worked and accrues over time. Here's how you can calculate annual leave.
Know the relevant employment agreement
The first step is to understand the terms of the employment agreement or industrial award that applies to the employee. These agreements may specify different annual leave entitlements, accrual rates, and conditions.
Determine the ordinary hours worked
The entitlement to annual leave is typically based on the number of ordinary hours worked during the employee's standard working week or roster. It doesn't include overtime hours.
Calculate the accrual rate
The annual leave accrual rate can vary, but the standard rate is 4 weeks of paid leave for every year of service (or 20 days for a 5-day workweek). Accrual is calculated based on the equivalent full-time period of service for part-time employees or those with irregular working hours.
Example: If an employee works 38 hours per week, they accrue 4 weeks of annual leave (20 days) for every year of service.
Record & keep track
Employers should maintain accurate records of annual leave accrual for each employee, including the total accrued leave and any leave taken.
Taking annual leave
An employee's annual leave is to be paid at their base rate of pay. This rate may include allowances and loadings, but not overtime or penalty rates. The timing and approval of annual leave are usually subject to the employer's policies and the employment agreement.
Understanding leave loading
In some industries and awards, employees may be entitled to a leave loading, which is an additional payment on top of their base pay when taking annual leave. This compensates for not receiving other benefits like overtime and penalty rates while on leave.
Managing leave requests
Employers have the right to manage annual leave requests to ensure business continuity. They can consider factors such as the employee's preferences, operational requirements, and the need to avoid leave clashing with other employees.
It's important to consult the specific employment agreement or award that applies to the employee, as there may be variations in entitlements and rules based on the industry, occupation, and location. Employers and employees should also be aware of the Fair Work Act's requirements regarding annual leave, as it sets out the minimum standards that must be adhered to.
For more information on how to work out annual leave, check out the Fair Work Ombudsman leave calculator. Additionally, you can click the button below to read our article on whether an employer can force you to take annual leave.
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