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Managing Excessive Annual Leave

If you have employees that have accrued excessive amounts of annual leave, this article will step you through the actions you can take as an employer to minimise the liability.

Accrual of excessive annual leave can be detrimental to both an employer and an employee. Some reasons why excessive annual leave may have been accrued include; employees hoarding leave, saving leave for a rainy day, fear of going on leave as they may be unable to catch up on work on their return, fear that their work may be scrutinised when they are on leave or even managers not approving or providing leave to cope with operational demands. Whatever the reasons, there are risks that must be managed and it is important that employers actively manage leave.

Directing an employee to take annual leave

The National Employment Standards (NES) including the Award or Enterprise Agreement where applicable regulate how annual leave is taken and accrued.

An employer can reasonably request an employee take excessive annual leave accrued with at least 4 weeks’ notice (some Awards have different notice periods). Although excessive annual leave is not defined in the Fair Work Act 2009, most Awards generally refer to 8 weeks. In most cases the employee must still have a balance of at least 4 weeks annual leave.

If the employee is an award free/agreement free employee, the s94(5) of the Fair Work Act 2009 allows for an employer to direct the employee to take leave as long as the request in reasonable. A requirement to take paid annual leave may be reasonable if, for example:

  1. the employee has accrued an excessive amount of paid annual leave; or
  2. the employer’s enterprise is being shut down for a period (for example, between Christmas and New Year)

Cashing out leave

Where permitted by an award, annual leave may be cashed out. Provisions for the cashing out of annual leave must be explicitly noted in the award for cashing out of leave to occur.

An award/agreement free employee may agree to the cashing out of annual leave in accordance with s94 of the Fair Work Act 2009. The employee must however be left with a balance of at least 4 weeks and the agreement to cash out must be in writing.

Need help

Workplace Partners will be available throughout the Christmas and New Year period to assist members with any queries on 1300 116 400 or email [email protected].

Attached to this article is a template letter for all members to provide notice to an employee to take leave or to advice of a shutdown period.

The information contained within this article is for general advice only, to obtain specific advice for your business contact us on 1300 116 400 or email [email protected], this advisory service if free for all members. To find out more about Workplace Partners visit us at


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