Annual leave¶

Annual leave is paid time off work. It lets an employee take a break — a holiday, a rest, or time for personal matters — and still be paid. It is sometimes called holiday leave or annual holidays.

Annual leave is one of the entitlements in the National Employment Standards (the NES). Fair Work explains that full-time and part-time employees build it up over the year, while casual employees generally do not get paid annual leave.

In one line

Annual leave is paid time off. The NES gives full-time employees 4 weeks a year, pro rata for part-time — it builds up over time and carries over year to year.

Why this matters¶

Employees rely on annual leave to take a break without losing pay. As an employer, you need to know how much they are entitled to, how it builds up, and that unused leave does not simply disappear at the end of the year. Getting this right keeps your payroll correct and avoids underpaying someone.

What you will learn¶

What annual leave is and who gets it
The NES minimum for full-time and part-time employees
How annual leave builds up and carries over

Understanding the concept¶

Under the NES, Fair Work sets the minimum annual leave at 4 weeks per year for a full-time employee, based on their ordinary hours of work.

A part-time employee gets the same 4 weeks, but worked out pro rata — that is, in proportion to the hours they work. So a part-time employee who works half the hours of a full-timer builds up leave at half the rate.

Some shiftworkers get more. Fair Work says certain shiftworkers are entitled to 5 weeks of annual leave a year instead of 4. Whether an employee counts as this kind of shiftworker depends on their award or agreement.

Casual employees generally do not get paid annual leave. This is because casuals are usually paid a higher hourly rate — a casual loading — to make up for not getting some entitlements.

Annual leave accrues progressively. Fair Work explains it builds up gradually as the employee works through the year, starting from their first day. Any unused annual leave carries over — it rolls from one year to the next and does not reset to zero.

For accountants & bookkeepers

Annual leave accrues on ordinary hours of work and continues to accumulate during most paid leave. Fair Work notes that when employment ends, any unused annual leave is paid out in the final pay at the amount the employee would have received had they taken it, including annual leave loading where it applies. Award or agreement terms can improve on the NES minimum but cannot reduce it.

Example¶

A full-time employee works a standard year. Over that year they build up 4 weeks of paid annual leave, a little at a time with each pay. They take 1 week off mid-year for a holiday and are paid as normal for it. At the end of the year they have not used the other 3 weeks, so those 3 weeks carry over and are still available the next year.

A part-time colleague who works half the hours builds up the equivalent of 4 weeks of their own hours over the same year — pro rata to what they work.

Common mistakes¶

Thinking annual leave resets each year — unused leave carries over.
Giving casual employees paid annual leave — casuals generally do not accrue it.
Forgetting part-time leave is pro rata, not a flat 4 weeks of full-time hours.
Assuming everyone gets 4 weeks — some shiftworkers are entitled to 5.

How this works in myaccountant¶

In the app — myaccountant tracks each employee's annual leave balance and accrues leave with every pay run. When an employee takes annual leave, you record it on the pay run and it shows on their payslip, and the balance reduces accordingly.

Key points¶

Annual leave is paid time off work.
The NES minimum is 4 weeks a year for full-time employees.
Part-time employees get the same 4 weeks worked out pro rata.
Some shiftworkers are entitled to 5 weeks.
Casual employees generally do not get paid annual leave.
Annual leave builds up over the year and unused leave carries over.

Learn next¶

General information only — not tax, super or financial advice.

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