Navigating Leave Entitlements in Australia: A Practical Guide for Business Owners

Multiple annual leave applications during your busiest times, requests for a paid day to look after someone other than an immediate family member, what entitlements are owed to staff if your business temporarily shuts over the festive season break, understanding whether parental leave is paid or unpaid: navigating employee leave can be confusing for business owners. Between balancing employee expectations, requirements under the Fair Work Act and operational demands, it can be hard to know what your lawful obligations are, let alone how to manage these on a day-to-day basis.

In this guide we’ll walk you through the essentials of leave entitlements in Australia using plain language, real-world insights and practical tips. We’ll cover the types of leave employees are entitled to, who qualifies, how industry nuances can affect leave policies, common traps we see businesses fall into and some tips to avoid these. If you want to get leave entitlements right without losing sleep over your rights and obligations as an employer, this guide is for you.

And rest assured: if after reading this post any part of the leave entitlements topic still feels like a mystery, you’re not without support. At Bare Bones Consulting, we specialise in helping businesses across Australia make sense of complex employment obligations. Whether it’s developing the right HR policies, reviewing compliance requirements under the Fair Work Act or handling a challenging employee situation, we offer employers flexible, tailored human resources support without lock-in contracts or complicated terms. All good? Let’s roll!

Key Takeaways

• With the exception of certain State public sector and local government workers, National system employers and their employees in Australia are covered by minimum leave entitlements under the National Employment Standards (NES) of the Fair Work Act 2009.
• Common types of leave under the NES include annual leave, personal leave, parental leave, compassionate and bereavement leave and long service leave.
• Business demands and shutdown periods affect how leave should be managed.
• Common pitfalls for employers include having no formal policy on leave, refusing applications for leave unlawfully, and inconsistent application of policies.
• A simple, written Leave policy and basic Leave tracking system can save you time and prevent disputes.
• HR advice tailored to your business is key to helping you manage leave fairly, legally and with less stress.

Need help managing leave in your business? Enquire online or call to speak with an experienced HR consultant who understands how real businesses work….and with the knowledge to craft practical, cost effective solutions to your challenges.

Understanding Leave Entitlements in Australia

All employees covered by the Fair Work Act 2009 are entitled to minimum leave standards through the National Employment Standards (NES). These entitlements apply regardless of your industry, business size or whether you have written policies and procedures in place.

The NES outlines the following core leave types:

• Annual leave
• Sick and carer’s leave (also known as personal leave)
• Parental leave
• Compassionate and bereavement leave
• Family and domestic violence leave
• Community service leave
• Long Service leave
• Unpaid leave

In our experience, many business owners assume “leave” just means annual leave or sick leave, but there’s more to it than that. Failing to understand the full picture can lead to serious compliance risks and unnecessary disputes with employees.

Modern awards or registered agreements may add to or modify employee leave entitlements, so it’s important to know where to check to ensure you’re applying the correct entitlements to your workers.

Types of Leave and Key Rules

A basic understanding of each type of leave is key to applying entitlements fairly and lawfully. Let’s summarise the main types of leave and key points you should know on each:

Annual Leave

All employees (except for casual employees) get paid annual leave. This entitlement comes from the National Employment Standards (NES).

Full-time employees are entitled to four weeks of paid annual leave each year. This leave accrues progressively based on hours worked and can be taken as agreed between the employer and employee.

Part-time employees are entitled to the same amount of paid annual leave as full-time employees: four weeks per year. However, this is calculated based on their ordinary hours of work, meaning they receive a pro-rata amount.

Shift workers may get up to 5 weeks of annual leave per year. What’s a shift worker? An employee who works fixed hours of work (e.g. shifts or rosters) that are outside or partly outside of normal working hours (e.g. 9am – 5pm). Awards and registered agreements often provide a specific definition of shift worker and what annual leave entitlements apply.

Annual leave accumulates from the first day of employment. The leave accumulates gradually during the year and any unused annual leave will roll over from year to year.

Awards, enterprise agreements and other registered agreements can’t offer less than the NES but they can provide for more annual leave. Lesson? Make sure you know what Award (or Awards) or registered agreement apply to your employees so you’re applying the correct entitlements.

Some Awards and registered agreements permit an employee to cash out a portion of their annual leave, based on specific terms. This includes having a written agreement in place and the employee needing to have at least four weeks annual leave left over following the leave period being cashed out. Need to know more? The Award is your first reference point.

Little known fact: while full time and part time employees are entitled to annual leave, they need to request it from their employer, and the employer can refuse the request if it’s reasonable to do so. Reasonable refusal may include if the employee’s absence would cause significant disruption to the business, or if the employee’s request would leave the employer with inadequate staffing.

An employer can also direct an employee to take annual leave, particularly during a business shutdown or if the employee has excessive accrued leave.

Sick and carer’s leave

Sick and carer’s leave lets an employee take time off to help them deal with personal illness, caring responsibilities, or family emergencies. It’s also known as personal leave or personal / carer’s leave.

All employees except casuals are entitled to paid sick and carer’s leave. This entitlement comes from the National Employment Standards.

Full-time employees are entitled to 10 paid sick days per year. The leave is pro-rata for part-time employees. Unused sick and carer’s leave is carried over to the next year.

An employee has to let their employer know that they are going to take sick or carer’s leave. This has to be done as soon as possible, and can be after the leave has started. They should also specify how long they will be off or expect to be off work.

An employer can ask an employee to give evidence that shows the employee took the leave because they:

• weren’t able to work because of an illness or injury, or
• needed to provide care or support to an immediate family or household member (because of an illness, injury, or unexpected emergency affecting the member).

Employers can ask employees to provide evidence for as little as one day or less off work.

So what constitutes “evidence”? Medical certificates or statutory declarations are examples of acceptable forms of evidence. While there are no strict rules on what type of evidence needs to be given, the evidence has to convince a reasonable person that the employee was genuinely entitled to the sick or carer’s leave.

An employee who doesn’t give their employer evidence when asked may not be entitled to be paid for their sick or carer’s leave.

Parental Leave

Employees can take parental leave when a child is born or adopted.

Employees are eligible to take unpaid parental leave if they:

• have or will have responsibility for the care of a child
• have worked for their employer for at least 12 months:
• before the date or expected date of birth if the employee is pregnant
• before the date of the adoption, or
• when the leave starts.

Casual employees must also have:

• been working for their employer on a regular and systematic basis for at least 12 months
• a reasonable expectation of continuing work with the employer on a regular and systematic basis, had it not been for the birth or adoption of a child.

The eligibility rules are the same for all types of parental leave, including continuous and flexible parental leave.

Compassionate and bereavement leave

The National Employment Standards provide all employees, including casuals, with an entitlement to compassionate leave. This is also known as bereavement leave.

Employees are entitled to two days of paid compassionate leave per permissible occasion, such as the death or serious illness of an immediate family member.

Employees don’t accumulate compassionate leave and it’s not a part of their sick and carer’s leave entitlement. Employees can take compassionate leave any time they need it.

Full-time and part-time employees receive paid compassionate leave. They’re paid at their base pay rate for the ordinary hours they would have worked during the leave. Casual employees receive unpaid compassionate leave.

Family and domestic violence leave

“Family and domestic violence’ means violent, threatening or other abusive behaviour by certain individuals known to an employee that both:

• seeks to coerce or control the employee
• causes them harm or fear.

All employees are entitled to 10 days of paid family and domestic violence leave each year. This includes full-time, part-time and casual employees. The entitlement to paid family and domestic violence leave comes from the National Employment Standards (NES). It’s a paid minimum leave entitlement, like annual leave or paid sick and carer’s leave.

Employees must be experiencing family and domestic violence to be eligible to take paid family and domestic violence leave.

Paid family and domestic violence leave is a stand-alone leave entitlement. This means employees get it separately from other types of leave, such as annual leave or paid sick and carer’s leave. An employee’s paid leave entitlement is available in full immediately and resets on their work anniversary. It doesn’t accumulate from year to year.

An employer can ask their employee for evidence that shows the employee took the leave to deal with family and domestic violence. If the employee doesn’t provide the requested evidence, they may not get paid the leave. The evidence has to convince a reasonable person that the employee took the leave to deal with the impact of family and domestic violence and it’s not practical for them to do so outside of their work hours.

Types of evidence can include:

• a statutory declaration
• documents issued by the police service
• documents issued by a court, or
• family violence support service documents.

Employers can ask employees to provide evidence for as little as one day or less off work.

Community service leave

Employees, including casual employees, can take community service leave for activities such as voluntary emergency management activities or jury duty.

With the exception of jury duty, community service leave is unpaid.

An employee is entitled to take community service leave while they are engaged in the activity and for reasonable travel and rest time.

There is no limit on the amount of community service leave an employee can take.

Long Service Leave

An employee gets long service leave after a long period of working for the same employer.

Most employees’ entitlement to long service leave comes from long service leave laws in each state or territory. These laws set out:

• how long an employee has to be working to get long service leave (for example, after 7 years)
• how much long service leave the employee gets.

In some states and territories long serving casuals are eligible for long service leave.

In most states, employees qualify after 7 to 10 years of continuous service. Entitlements and service periods vary so it’s best to contact the long service leave agency in your state or territory.

Unpaid leave

Unpaid leave is when an employee is absent from work without pay.

Some types of unpaid leave are an entitlement under the National Employment Standards (NES). These include:

• unpaid parental leave
• unpaid carer’s leave
• unpaid community service leave
• unpaid compassionate leave (casuals only).

An employee may ask to take unpaid leave for reasons not provided by the NES.

Unpaid leave is often taken because the employee has no paid leave left.

Little known fact: aside from unpaid community service leave, other periods of unpaid leave don’t count towards an employee’s length of service. This means that the period of unpaid leave does not count when calculating most accumulated entitlements, such as paid leave. It’s worth doing your homework unpaid leave as knowing your rights as employer not only helps you hold employees to account, but can impact on what you need to pay when an unpaid leave situation pops up.

Industry-Specific Leave Considerations

Every business has its own hours of operation, peak periods and times when things are a little less busy. Your Leave policy should reflect this. Examples?

• Medical clinics need to plan for the right backup when health professionals take annual leave to ensure patient appointments aren’t disrupted.
• Accounting firms typically restrict leave during peak times like end of financial year or quarterly Activity Statement preparation periods.
• Retail and hospitality often require availability during school holiday periods, public holidays and may reduce hours down during quieter periods.
• Construction and trades typically shut down for an extended period over Christmas, which affects how annual leave should be managed.

We always advise our clients: your Leave policy should match the reality of your business operations – not someone else’s. And that’s why tailored = better. How does your Leave policy stack up?

Not sure if your leave policy aligns with your business or industry sector needs? Contact us for a simple and practical review. Even a single change to a generic policy can save you big dollars. Or avoid unnecessary employee drama.

The shutdown situation

A shutdown is when a business chooses to temporarily close down all or part of a business for a particular period, such as Christmas and New Year. A shutdown is also known as a close down.

During a shutdown, employees can be directed to take annual leave if:

• their award or agreement allows it, or
• they aren’t covered by an award or agreement.

As a result of changes to modern Awards which came into effect on 1 May 2023, employers no longer have the same powers to direct employees to take annual leave or leave without pay during shutdown periods. Information on the rule changes on shutdowns is available here.

Managing Leave in a Small Team

Managing leave effectively gets trickier when your team is small. A single person represents a significant percentage of your employee group so when one person is away, it can affect output, service levels and morale. That’s why leave and absentee planning is essential.

Start by clearly communicating your expectations that employees should appreciate a range of business and customer service factors when lodging applications for annual leave, particularly around high-demand times like school holidays or Christmas. Consider using a first-come-first-served system or define a minimum notice period for annual leave applications. Include wording in your Leave policy that employees are advised to not book holiday flights or accommodation until they receive formal approval of their leave from the employer.

Communicate approvals and rejections of leave applications quickly and respectfully so people aren’t left guessing as to whether their planned time off will eventuate.

Some small businesses we work with find it useful to maintain a casual pool or develop a list of reliable short-term independent contractors. This provides a buffer when someone takes unexpected leave or when multiple leave requests overlap.

Balancing fairness with operational needs can be a challenge, but with upfront planning, well worded policies and clear communication, it’s possible to keep your team satisfied without sacrificing your workflow or customer service levels

Common Leave Management Mistakes

We’ve witnessed owners trying to manage employee leave based on ad hoc decisions, memory or their experience in other businesses – that’s when issues can start.

With over 20 years across a diverse range of industries, there’s not many leave situations we’re yet to witness. Here’s some common traps:

• Failing to fully understand the terms and conditions around the various types of leave.
• Having employees accrue large annual leave balances: not healthy for them and not smart for your company financial position.
• Denying leave applications without valid or lawful reasons.
• Failing to communicate shutdown periods in writing.
• Inconsistency when applying rules around leave applications or evidence of sick leave.
• Not applying the relevant award terms, including payment of annual leave loading.

Avoiding these mistakes starts with basic knowledge, clear processes, solid documentation and a consistent approach that everyone in the business understands and follows. And possibly some external help from a HR specialist. Our recommendation for such a specialist? Click here.

Best Practices for Leave Compliance

Compliance with your Leave obligations as an employer doesn’t need to be complicated. A smart place to start is by reviewing the National Employment Standards so you appreciate the range of leave types that apply to all employees. Checking the Award (or Awards) that apply to your employees is the next step. Awards typically contain a section titled “Leave and Public Holidays” with content on annual leave, personal leave, parental leave and community service leave.

You should also check to see if and when annual leave loading applies. This is an entitlement many employees either forget or feel does not apply to them.

Once you know what your obligations are, align this with your operational requirements. Now you can start to put together a simple Leave policy. Content in good policies typically includes:

• types of leave available and number of days of each for full time, part time and casual employees
• a link to the Fair Work Ombudsman’s webpage on “Leave”
• Sick leave procedure and when evidence is required to be produced by the employee
• Company shutdown period (if applicable)
• Leave application process: timeframes and forms (including clarification that the time when annual leave is taken is by mutual agreement between the employer and employee)
• Company protocol if more than one employee requests leave at the same time
• Leave exclusion periods

Your policy should be introduced to each employee upon commencement, be readily accessible and even discussed during your interview process. Problems are greatly reduced when employees have an upfront knowledge of your processes, how these align with the specific operational requirements of your business and your expectations that employees comply these.

You’ll also need a reliable way to track leave. Whether you use a spreadsheet or a digital platform, the system should clearly show requests, approvals and leave balances. By having a tracking and communication tool, you can avoid confusion and have a record to refer to if any issues arise.

Training is just as important. Supervisors and managers need to understand how leave entitlements work so they can apply the rules fairly and consistently across their teams. When individual staff members are treated differently, trust breaks down and so does compliance. Training should also include managing team leave balances to ensure staff wellbeing is prioritised and there’s no unnecessary excessive leave accrued.

And finally, when something seems unclear or out of the ordinary: don’t guess. That’s when the biggest mistakes tend to happen. The answer to your question is generally out there…it’s simply a matter of knowing where to look. Reaching out to an expert for help early can prevent bigger issues later.

By having a clear policy, reliable systems and informed employees and managers, you can keep Leave management simple, compliant and stress-free.

Untaken annual leave: the cash flow risk to your business

Cash flow problems are the leading cause of business failure for small businesses in Australia.

When an employee leaves their job, they are entitled to be paid for certain types of unused leave. The total amount the employer owes for this accrued leave is called leave liability.

Excessive accrued annual leave balances can represent a significant financial liability for employers. It’s crucial for businesses to manage this liability effectively to ensure a balance between supporting employee wellbeing and maintaining financial health of the organisation.

Some strategies to manage excessive annual leave balances and encourage your team to take their full leave entitlements each year include:

• Negotiating with staff members to pay out excessive amounts of unused leave. This reduces the employee’s leave balance as they are paid out rather than having the leave owing to them.
• Encouraging employees to take regular days off to reduce their leave balances to acceptable levels (such as every Friday or every Monday, if practical).
• Directing your staff to take leave if they have built up excessive amounts. You must follow the Fair Work Ombudsman’s guidelines and terms of the applicable Award to ensure your legal compliance with workplace laws if you take this approach.

Bare Bones Consulting: HR Help for Real Businesses

If you’re not ready to hire your own in-house HR person but can see how having access to an employment specialist on call makes sense, Bare Bones Consulting is here to help.

With over 20 years of hands-on experience in HR, we’ve supported Australian businesses through everything from hiring their first employee to guidance when they have the opportunity to expand internationally…and everything in between. We understand that no two businesses are identical, and that to be effective, HR needs to be as flexible and dynamic as the people it supports.

We offer tailored HR advice to employers across a wide range of industries, sizes and years in operation. Whether you need help interpreting modern award entitlements, addressing a challenging employee underperformance matter, assistance with draft of policies and procedures or simply reviewing what you already have in place to ensure everything’s compliant and right for you, our solutions are practical, simple to implement and value for money.

Our Leave advice services include:

• Leave policy development and updates
• Compliance reviews against NES, awards and agreements
• Guidance on managing unusual or high-risk leave scenarios

Unlike many of our competitors, we don’t do subscriptions or offer generic cookie-cutter document templates. Just expert HR support when and how you need it, without the jargon, lock-in commitment or hidden costs.

Conclusion

While offering your employees correct leave entitlements is part of your legal obligations as an employer, there’s no need for this element of business to feel overwhelming. With the right knowledge, clear communication and a leave management system that fits your business, you can control leave in a way that protects you and supports your team…offering you time to focus on the more important things to you.

Need help making sense of leave entitlements for your business? Leave it to us…see what we did there? Enquire online today or call to speak with a HR specialist who understands the realities of running a business and can offer simple, practical and cost-effective solutions that really work.