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How to Manage Employee Leave in a SME

When it comes to employee leave, there are multiple things to consider. Firstly, you need to meet your obligations under the Fair Work Act. Secondly, you want employee leave to cause minimal negative impact to the business. Lastly, you want your employees to have a good experience when it comes to leave. Let’s take a look at the best way to manage these (sometimes competing) interests.


The needs of the business

The smaller the team, the bigger the impact when an employee goes on annual leave. The Fair Work Act sets out every employee’s leave entitlement, but not when annual leave should be taken. It’s important to be upfront with employees about the requirements of the business, ideally, when you first hire them. For example, you may get really busy over Christmas, and can’t allow more than one person to take leave at that time of year. As you might have guessed, this can sometimes be a sore point with employees. That’s why it needs to be laid out and agreed to as early as possible. The last thing you want is someone springing a holiday over Christmas on you at the last minute.

The needs of your employees

In today’s mobile job market, keeping your employees happy is more important than ever. The younger generations, in particular, have become very reluctant to sacrifice their lifestyle for a job. Things have changed, the baby boomers lived to work and millennials are working to live. If you as a business owner don’t understand this, it can lead to tensions when it comes to conversations about leave. A little flexibility on your part can sometimes save you the expense of a new hire. This is another reason it’s crucial to discuss these things right at the start. If your employees can’t have any time at Christmas off, maybe you can make up for this by giving them extra time off at another time of the year, or early marks on Fridays, or even work from home days. Try to compromise so that everyone is happy.

The benefits of leave

It’s important for employees to take time off so they have a chance to unwind. Holidays can help prevent burnout, and regular breaks from work have a positive impact on both mental and physical health. It’s also a hassle when big leave balances accrue, because, when they’re taken or paid out, it has to be at the current rate of pay. If leave has accrued over a number of years this could be a significant cost. Untaken annual leave is also recorded as a liability on your balance sheet. For these reasons you should encourage your employees to take the leave they’re entitled to when it’s due. Try and do it in a way that will have minimal impact on the business. Work with your staff to resolve any issues.

Right – now the official stuff! We’ve sussed out the requirements from Fair Work Australia and broken it down for you so you know what you have to do in each case.

Annual Leave

Annual leave (also known as holiday pay) allows an employee to be paid while having time off from work. The entitlement to annual leave comes from the National Employment Standards (NES). Awards, enterprise agreements and other registered agreements can’t offer less than the NES but they can give more annual leave.

Who is entitled to annual leave?

All employees (except for casual employees) get paid annual leave.

How much annual leave does an employee get?

Full-time and part-time employees get 4 weeks of annual leave, based on their ordinary hours of work.

Example: annual leave for part-time employees

Jane is a part-time employee who works 20 hours per week for a year.

During one year, she will accumulate 80 hours of annual leave (the equivalent of 4 weeks work for her).

Shift workers

Shift workers may get up to 5 weeks of annual leave per year.

Find information about annual leave for shift workers in your award by using the calculator here.