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Strategies for Employers to manage excessive annual leave accrual

Under the National Employment Standards (NES) all employees covered by the national workplace relations system other than casual employees are entitled to a minimum of four weeks’ paid annual leave each year, or five weeks for certain shift workers (depending on the award). 

Annual leave accrues progressively during the year according to an employee’s ordinary hours of work and as a result some employees can accrue excessive annual leave balances over the course of their employment. 

By not taking a reasonable amount of annual leave, employees may pose a threat to their own health and safety as well as representing a significant financial liability for employers. The Fair Work Commission amended most modern awards to allow employers to direct employees (within the compliant awards) with excessive leave balances to take paid annual leave. This inclusion within the awards also permits in certain circumstances for employees to give their employer a written notice requiring paid annual leave to be granted. 

What is deemed as excessive leave accrual? 

Under the new award clause an employee has an excessive leave accrual if:

  • the employee has accrued more than eight weeks’ paid annual leave, or
  • for a shiftworker[1] if they have accrued more than 10 weeks’ paid annual leave.

How to approach excessive leave accrual?

As an employer, the first step should be to have a discussion with the employee to reach a suitable agreement on how to reduce or eliminate the excessive leave accrual. 

What can an employer do? 

If an employer is unable to reach an agreement with the employee as a first step, the employer may direct the employee in writing to take one or more periods of annual leave. 

A direction under the award clause to take annual leave:

  • must be in writing;
  • is of no effect if it would result at any time in the employee’s remaining paid annual leave balance being less than six weeks when any other paid annual leave arrangements are taken into account;
  • must not require the employee to take any period of paid annual leave of less than one week;
  • must not require the employee to take a period of annual leave beginning less than eight weeks or more than 12 months, after the direction is given; and
  • must not be inconsistent with any leave arrangement agreed by the employer and employee.

The employee must take paid annual leave in accordance with this direction under the award clause that is in effect.

How to deal with a dispute?

Any disputes in relation to excessive leave accruals should be dealt with under the dispute resolution procedure in the relevant award.

If you are unsure how to handle excessive leave accruals within your business, contact us for a confidential conversation. 

Need Help

Workplace Partners is available to assist you with any queries on 1300 116 400 or email [email protected].

The information contained within this article is not legal advice and 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 is available to all subscribers at no additional cost.

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