How leave accrues¶

Paid leave does not arrive all at once. It builds up little by little over the year as the employee works. This gradual build-up is called accrual, and when we say leave accrues progressively, we mean it grows steadily with each period the employee works, rather than being handed over in one lump at the start of the year.

This applies to paid annual leave (holiday leave) and paid personal/carer's leave (sick and carer's leave). Fair Work explains that both build up based on the employee's ordinary hours of work.

In one line

Paid leave builds up gradually across the year based on the hours an employee works — unused annual leave generally carries over, and casuals generally do not accrue paid leave.

Why this matters¶

Employees often ask how much leave they have, or why a new starter has only a small balance. The answer is that leave accrues as they work — so early on there is not much, and it grows over time. Understanding this helps you explain a leave balance and set the right expectation with a new employee.

What you will learn¶

What it means for leave to accrue progressively
How leave builds up based on the ordinary hours an employee works
That unused annual leave generally carries over, and that casuals generally do not accrue paid leave

Understanding the concept¶

An employee's ordinary hours are their normal working hours — for a full-time employee that is usually around a standard working week. Fair Work explains that paid leave accrues based on these ordinary hours of work. The more ordinary hours an employee works, the more leave they build up.

Because it is based on ordinary hours, accrual is proportional. A full-time employee builds up leave faster than a part-time employee who works fewer hours each week. A part-timer still accrues leave — just in proportion to the smaller number of hours they work.

The build-up is continuous. A little leave is added with each pay period the employee works, so the balance grows across the year. This is what "accrues progressively" means in practice.

For annual leave, there is an important extra point: unused annual leave generally carries over from one year to the next. Fair Work explains that annual leave does not have to be taken in the year it builds up — any unused balance rolls over, so it is not lost at the end of the year.

Casual employees are treated differently. Fair Work explains that casuals generally do not accrue paid annual leave or paid personal/carer's leave. Instead, casuals are usually paid a casual loading — a higher hourly rate — to make up for not getting these paid leave entitlements.

For accountants & bookkeepers

Fair Work describes the standard accrual as based on ordinary hours of work, with the yearly entitlement building up progressively across the year of service — 4 weeks of paid annual leave and, for paid sick and carer's leave, 10 days a year for a full-time employee (pro-rata for part-time). Leave generally keeps accruing while an employee is on paid leave. Award or agreement terms can add to these minimums, so check the instrument that covers the role.

Example¶

Maria starts a full-time job. In her first pay, only a small amount of annual leave and personal/carer's leave has accrued, because she has only worked a short time. As the weeks go by, her balances grow with each pay. By the middle of the year she has built up a useful amount of annual leave.

Maria does not use all of her annual leave that year. The unused portion carries over, so it is added to what she keeps building up the following year. Her colleague Jordan, who is a casual, does not see paid annual leave or paid personal/carer's leave build up at all — Jordan is paid a casual loading instead.

Common mistakes¶

Expecting a new employee to have a full leave balance straight away — leave builds up over time as they work.
Thinking unused annual leave is lost at the end of the year — it generally carries over.
Assuming casual employees accrue paid annual or personal/carer's leave — they generally do not.

How this works in myaccountant¶

In the app — each time you run a pay, myaccountant adds the leave the employee has accrued for that period to their balance, based on their hours. You can see each employee's current leave balances, and the balances also appear on the payslip so the employee can track how much leave they have built up.

Key points¶

Leave accrues progressively — it builds up gradually over the year as the employee works.
The amount that builds up is based on the employee's ordinary hours of work.
Full-time employees accrue faster than part-time employees, in proportion to hours.
Unused annual leave generally carries over from one year to the next.
Casual employees generally do not accrue paid annual or personal/carer's leave.

Learn next¶

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

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