First of all, some annual leave basics from the Fair Work Act (Cth) 2009:

• It’s for permanent employees. Casual employees do not get annual leave.
• 4 weeks accrues in a year of service. This is pro rata for permanent part-time employees.
• A “shiftworker” accrues 5 weeks of annual leave per year. A shiftworker will be defined in the applicable Modern Award, but is usually someone who could be rostered at any time 27/7.
• It’s usually taken at a time agreed to by the employer and employee.
• Any annual leave not used up will be paid out when an employee leaves.

Most Modern Awards will give leave loading of 17.5% when an employee goes on holidays.  However, it is important to check the relevant Modern Award to see if more might be paid, such as when someone works on night shift and usually has a penalty of 30%.  Award free plebs, such as accountants, lawyers, some managers and industrial relations consultants (me!) get no leave loading.

What about if someone has “too much” annual leave accrued?  The Fair Work Act is quite vague, in allowing an employer to direct an employee who has “excessive” annual leave to take annual leave.  Some Modern Awards have a clause that also allow this direction, and these usually go a bit further and define what is excessive, which is a big help.  If this is an issue, draft a policy that defines for you what is “excessive”, preferably with the Modern Award(s) as a guideline, and how much leave someone can be directed to take.

Companies can also direct employees to go on annual leave during an “annual shut down”.  Many people will be familiar with these over the Christmas and New Year’s period.  However, some companies have them during regular seasonal downturns in business.  It may only apply to a section of a business.  However, companies will need to give employees plenty of notice when this is going to happen, and try to minimise the amount of annual leave that this eats into.

An employer cannot unreasonably refuse a request for annual leave.  So, when might it be okay to refuse?  If I come to you this afternoon and say I want to take the next few weeks off on holidays, you can refuse, as you haven’t had enough notice.  If too many other people are having holidays at the same time and the work can’t get done, that’s a reasonable refusal.  If I don’t have enough, or any, annual leave accrued, then you can refuse my request.  It is completely employer discretion to allow unpaid annual leave.  If you do give permission for this, then get give this as written permission (co-signed by both parties), stating that this while it’s not a break in service, that it doesn’t count as service.

Also for consideration if drafting an annual leave policy, is what are your busy times of year when you can’t spare anyone, an annual leave application form, and notice required to take annual leave.  4 weeks is usually considered quite acceptable.