Australian annual leave (also called annual holidays) is a National Employment Standard (NES) entitlement under the Fair Work Act 2009 — every full-time employee accrues 4 weeks (20 days) of paid annual leave per year, and the entitlement cannot be traded away by contract or agreement. Part-time employees accrue leave on a pro-rata basis, and casual employees do not accrue annual leave. The NES sets the floor — Modern Awards and enterprise agreements can provide more generous entitlements but cannot reduce the NES minimum.
This guide covers the 4-week entitlement, how leave accrues, the leave loading payment, rules for cashing out and requesting leave, and the interaction between the NES and Modern Awards.
Key takeaways
- Every full-time employee accrues 4 weeks (20 days) of paid annual leave per year under the NES (s.86 Fair Work Act).
- Part-time employees accrue leave on a pro-rata basis based on ordinary hours worked.
- Casual employees do not accrue annual leave but receive a casual loading (typically 25%) to compensate.
- Leave loading of 17.5% is common under many Modern Awards — it is not a NES requirement but is widely applied.
- Annual leave accumulates year to year — unused leave does not expire under the NES.
The NES entitlement
Section 86 of the Fair Work Act 2009 is the operative provision:
“If an employee is entitled to an annual leave accrual, the employee accrues so much paid annual leave as equals 4 weeks in each 12-month period of continuous employment.”
The key elements:
- Full-time employees: 20 days (4 weeks × 5 days) per 12-month period
- Part-time employees: Pro-rata based on ordinary hours
- Continuous employment: The entitlement accrues from the first day of employment
- Paid leave: The employee receives their base rate of pay (not including overtime, bonuses, or commissions) during leave
How leave accrues
Annual leave accrues progressively throughout the year, not as a lump sum at the start. Under the NES:
- Leave accrues at the rate of 20 days per 12-month period
- For a full-time employee working 5 days per week: 1.667 days per month (20 ÷ 12)
- Leave accrues from the first day of employment — there is no qualifying period
- Leave accumulates year to year — unused leave carries forward indefinitely
The progressive accrual means that an employee who resigns after 6 months has accrued 10 days of leave, not 20. The employer must pay out the accrued but untaken leave on termination.
Leave loading
Leave loading is a payment of 17.5% on top of the employee’s base rate of pay during annual leave. It is not a NES entitlement — it comes from Modern Awards and enterprise agreements.
| Aspect | Detail |
|---|---|
| Rate | 17.5% of base rate during leave |
| Source | Modern Award or enterprise agreement |
| NES requirement | No — the NES does not mandate leave loading |
| Capping | Many Awards cap leave loading at the minimum weekly wage |
Leave loading compensates employees for the loss of overtime and other penalty payments they would have earned if working instead of on leave. Most Modern Awards in force as of 2026 include a leave loading provision.
Requesting and granting leave
Under s.88 Fair Work Act, the employee can request to take annual leave, and the employer can refuse the request only on reasonable business grounds.
Key rules:
- Employee’s right to request: The employee can request leave at any time
- Employer’s right to refuse: The employer can refuse on reasonable business grounds (e.g. peak trading period, insufficient staff)
- Employer’s right to direct: The employer can direct the employee to take leave in certain circumstances (e.g. during a business shutdown) under s.88
- Minimum leave periods: Some Awards require a minimum of 1 consecutive day of leave
The employer cannot unreasonably refuse a request for leave, but the employee cannot unreasonably refuse a direction to take leave.
Cashing out annual leave
Under s.94 Fair Work Act, annual leave can be cashed out in two ways:
- By agreement: The employee and employer agree to cash out leave. The payment must be at the employee’s base rate of pay for the leave period.
- On termination: The employer must pay out all accrued but untaken leave on termination of employment.
Cashing out while the employee is still employed is generally prohibited unless the Modern Award or enterprise agreement permits it. The NES sets a limit: an employee cannot cash out more than 2 weeks of leave per 12-month period under most Awards.
Interaction with Modern Awards
Modern Awards can provide more generous entitlements than the NES but cannot reduce them. Common Award enhancements include:
| Award | Enhancement |
|---|---|
| Hospitality Industry (General) Award | 5 weeks annual leave for shift workers |
| Banking Award | 5 weeks annual leave for shift workers |
| Health Professionals Award | 5 weeks annual leave for shift workers |
| Clerks—Private Sector Award | 4 weeks annual leave + leave loading |
The shift worker entitlement of 5 weeks is a common enhancement — employees who regularly work on Sundays or public holidays may qualify for the additional week under their Modern Award.
Employer obligations
Six core duties apply to Australian annual leave management:
- Accrue leave correctly — 20 days per 12-month period for full-time employees, pro-rata for part-time
- Pay leave loading — if the Modern Award or enterprise agreement requires it
- Record leave accurately — keep records of leave accrued, taken, and paid out under s.535 Fair Work Act
- Pay out accrued leave on termination — at the employee’s base rate of pay
- Process leave requests reasonably — refuse only on reasonable business grounds
- Do not cash out leave beyond the permitted limits without proper agreement
Common pitfalls
1. Not accruing leave from day one
Leave accrues from the first day of employment. There is no qualifying period. An employee who starts on 1 January has accrued leave by 2 January.
2. Paying out leave on termination at the wrong rate
Leave on termination must be paid at the base rate of pay, not the rate including overtime, bonuses, or other loadings. Paying at the wrong rate creates an underpayment or overpayment risk.
3. Refusing leave requests unreasonably
The employer can refuse leave on reasonable business grounds, but the refusal must be genuine and proportionate. A blanket refusal during a peak period without individual assessment is not defensible.
4. Not applying the leave loading
If the Modern Award requires leave loading, the employer must pay it. Failing to pay leave loading is a breach of the Award and may trigger an underpayment claim.
5. Letting leave accumulate indefinitely
While the NES does not limit leave accumulation, employers should encourage leave-taking. Large leave balances create a significant financial liability and may indicate burnout.
For more Australian context, see our guide to Australian personal leave and Australian long service leave.
A leave management system that accrues leave correctly, calculates leave loading, and tracks the NES and Modern Award entitlements for each employee keeps Australian annual leave compliance straightforward.
Frequently asked questions
How many days of annual leave do Australian employees get?
Full-time employees accrue 20 days (4 weeks) of paid annual leave per year under the NES. Part-time employees accrue leave on a pro-rata basis.
What is leave loading in Australia?
Leave loading is a payment of 17.5% on top of the employee’s base rate of pay during annual leave. It is not a NES entitlement but is commonly provided by Modern Awards.
Can an employer refuse an annual leave request?
Yes, but only on reasonable business grounds. The employer must genuinely assess the request and provide a business reason for the refusal.
Does annual leave accumulate?
Yes. Annual leave accumulates year to year and does not expire under the NES. Unused leave carries forward indefinitely.
Do casual employees get annual leave?
No. Casual employees do not accrue annual leave. They receive a casual loading (typically 25%) to compensate for the absence of leave entitlements.
Sources
- Fair Work Act 2009 — Part 2-2, Division 1
- Fair Work Ombudsman — Annual Leave
- National Employment Standards
Last updated: 26 July 2026. This article is general guidance, not legal advice. Annual leave entitlements depend on the applicable Modern Award or enterprise agreement — confirm current terms with the Fair Work Ombudsman.
If you are moving from policy guidance to day-to-day administration, our guide to leave management software for Australia covers the workflows and records to evaluate.