Annual leave — known as “annual holidays” under Australian employment law — is a fundamental entitlement under the National Employment Standards (NES). Every Australian business must provide at least 4 weeks of paid annual leave to full-time employees, with additional provisions for shift workers. This template helps you build a clear, NES-compliant annual leave policy that covers entitlements, accrual, cashing out, and management.
Key Takeaways
- The NES provides 4 weeks (20 days) of paid annual leave per year for full-time employees.
- Shift workers are entitled to an additional week (5 weeks total) under the NES.
- Annual leave accrues progressively and accumulates from year to year.
- Employers can require employees to take leave in certain circumstances, and employees can request to cash out leave.
What This Template Covers
This template provides a complete annual leave policy for Australian businesses. It covers the NES 4-week entitlement, shift worker provisions, accrual and accumulation, cashing out rules, employer-directed leave, leave loading, and public holiday interactions. It is designed for businesses of all sizes and can be adapted to reflect applicable modern awards or enterprise agreements.
Annual Leave Policy Template
1. Purpose
[Company Name] recognises that annual leave is essential for employee rest, recovery, and work-life balance. This policy outlines the annual leave entitlements, procedures, and management practices that apply to all employees.
2. Scope
This policy applies to all employees of [Company Name], including full-time, part-time, and casual employees (where annual leave accrues). It is subject to the National Employment Standards (NES) under the Fair Work Act 2009 and any applicable modern award or enterprise agreement.
3. NES Entitlement
Under the National Employment Standards (Fair Work Act 2009, s. 86–91):
- Full-time employees are entitled to 4 weeks (20 days) of paid annual leave per year.
- Shift workers (as defined by the NES) are entitled to 5 weeks (25 days) of paid annual leave per year.
- Part-time employees accrue annual leave on a pro rata basis relative to their ordinary hours of work.
- Casual employees do not receive annual leave but receive a casual loading (typically 25%) in lieu of leave entitlements.
4. Accrual and Accumulation
- Annual leave accrues progressively throughout the year. For full-time employees, this is approximately 1.667 days per month (or 0.385 days per week).
- Unused annual leave accumulates from year to year. There is no “use it or lose it” rule under the NES, though employers may encourage employees to take leave.
- Annual leave continues to accrue during periods of paid leave (including personal/carer’s leave, compassionate leave, and parental leave).
5. Leave Year
[Company Name]’s leave year runs from [1 January to 31 December / 1 July to 30 June / employee’s start date anniversary].
6. Booking and Approval
- Leave requests should be submitted via [HR system / leave request form / email] at least [2 weeks] in advance.
- Managers will approve or deny requests based on business needs, team coverage, and fairness.
- Leave requests during peak periods (e.g., [specify busy periods]) may require [4 weeks] advance notice.
- Approved leave cannot be withdrawn by the employee without manager consent.
7. Cashing Out Annual Leave
Under the NES, employees may request to cash out annual leave, subject to the following conditions:
- The request must be in writing.
- The employee must retain at least 4 weeks of accrued annual leave after the cash-out.
- Payment for cashed-out leave must be at the employee’s base rate of pay (excluding penalties, loadings, or allowances).
- Employers can refuse a cash-out request if it is not reasonable in the circumstances.
Some modern awards allow employers to cash out leave without employee consent (e.g., upon termination or where excessive leave has accumulated). Check your applicable award.
8. Employer-Directed Leave
Under the NES, an employer may require an employee to take annual leave in the following circumstances:
- The employee has an excessive amount of accrued annual leave (typically more than 8 weeks, or as specified in the applicable award).
- During a close-down period (e.g., Christmas/New Year shut-down), provided at least 4 weeks’ notice is given.
9. Leave Loading
[Company Name] provides leave loading at [17.5% / as per applicable modern award / not applicable] on annual leave taken. Leave loading is paid on the base rate of pay and is designed to compensate for the loss of overtime or penalty rates during leave.
10. Public Holidays and Annual Leave
- Public holidays falling during a period of annual leave are not counted as annual leave days.
- If a public holiday falls on a day the employee would normally work, that day is not deducted from their annual leave balance.
- If a public holiday falls on a day the employee would not normally work, no adjustment is made.
Legal Requirements Summary
| Requirement | Detail |
|---|---|
| Legislation | Fair Work Act 2009, Part 2-2, Division 1 (NES) |
| Full-time entitlement | 4 weeks (20 days) per year |
| Shift worker entitlement | 5 weeks (25 days) per year |
| Part-time entitlement | Pro rata based on ordinary hours |
| Accumulation | Leave accumulates from year to year |
| Cashing out | On request; must retain 4 weeks |
| Employer-directed leave | Excessive accrual or close-down (4 weeks’ notice) |
| Leave loading | As per applicable award (typically 17.5%) |
Customisation Tips
- Offer more than the NES minimum. 4 weeks is the legal minimum. Offering 5 weeks or additional personal days is a competitive benefit.
- Address leave loading clearly. If your award provides for leave loading, ensure the policy reflects this. If you choose to pay it as a discretionary benefit, state this explicitly.
- Include a close-down procedure. If your business closes for a period each year, outline the notice requirements and how leave will be deducted.
- Define “excessive leave.” The NES allows employers to direct employees to take leave if they have an excessive balance. Define the threshold (e.g., 8 weeks) in your policy.
Common Mistakes to Accrue or Lose Leave?
Can we force employees to take leave during a Christmas shut-down?
Yes. Under the NES, an employer may require an employee to take annual leave during a close-down period, provided at least 4 weeks’ notice is given. The notice must be in writing and specify the dates the employee is required to take as leave.
Can we cash out annual leave without the employee’s request?
Under the NES, annual leave can only be cashed out on the employee’s request (and they must retain at least 4 weeks). However, some modern awards permit cash-out without employee consent in specific circumstances (e.g., termination of employment, or where the employee has excessive accrued leave). Check your applicable award.
Does annual leave accrue during parental leave?
Under the NES, annual leave continues to accrue during paid parental leave. During unpaid parental leave, annual leave does not accrue unless the applicable modern award or enterprise agreement provides otherwise.
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