Every year, all permanent employees are entitled to paid time off work for recreation and rest. Employees become entitled to annual leave after working for the same employer continuously for 12 months. The minimum annual leave entitlement is four weeks per year, but some employers may allow more leave.  Employees can check their employment agreements to see what their entitlements are.  After another 12 months the employee becomes entitled to a further four weeks’ annual leave.

Usually employers and employees agree on when annual leave should be taken, but there are times when the employer can make an employee take leave at a specific time.  For instance if the business has a customary close down period.

An employer must give 14 days’ notice to the employee.  If the employee has no annual leave owing then the employee may need to take leave without pay, unless the employer agrees to the employee taking annual leave in advance.

There are usually two different ways to calculate an employee’s annual leave entitlement (the method used is whichever produces the higher total):

  • The employee’s ordinary weekly pay at the beginning of the holiday; or
  • The employee’s average weekly earnings for the 12 months before the end of the last pay period before annual leave.

There are exceptions to this, for example, where an employer and employee agree to pay on a pay-as-you-go basis.

Pay as you go leave payments are only allowed in very limited circumstances where it is not practiced to provide for holidays (for instance for casual employees).  Annual leave entitlements will be paid out at the rate of at least 8% of earnings before tax and paid with regular pay instead accruing annual leave.  The leave amount must also be shown separately in each pay.

Annual leave payments may become more complicated during the time a person is on parental leave and the 12 months after their return to work. Annual leave cannot be taken during a period of parental leave but this does not stop an employee accruing annual leave over this time.

Annual leave taken in the 12 months after an employee returns to work is calculated as average weekly earnings only. If an employee takes annual leave immediately after parental leave, without actually returning to work, annual leave payments would be $0 per week because the employee’s average weekly earnings over the past 12 months has also been $0. However, if leave is taken 12 months after returning to work from parental leave, annual leave payments will be at the usual rate.