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Tips in managing employee leave in a small team

Hiring employees for your business comes with a range of challenges. One thing you may not have given much thought to is leave.

There are three things to consider here: Firstly, your obligations under the Fair Work Act. Secondly, how having absent employees will affect your day to day operations. And lastly, ensuring that your employees are happy with the leave arrangements you are offering. Here’s what you need to know:

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.

How to Manage Employee Leave in an 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.

Different types of leave that an employee is entitled to

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).


Shiftworkers 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.


How does annual leave accumulate?

Annual leave accumulates from the first day of employment, even if an employee is in a probation period.

The leave accumulates gradually during the year and any unused annual leave will roll over from year to year.

Annual leave accumulates when an employee is on:

  • paid leave such as paid annual leave and paid sick and carer’s leave
  • community service leave including jury duty
  • long service leave.

Annual leave does not accumulate when the employee is on:

  • unpaid annual leave
  • unpaid sick/carer’s leave
  • unpaid parental leave.

The Australian Government’s Paid Parental Leave Scheme is not considered to be paid leave. An employee does not accumulate annual leave while being paid by the Paid Parental Leave Scheme.

For a full breakdown of all the relevant info on Annual Leave, click here.

Sick & carer’s leave

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

Sick leave can be used when an employee is ill or injured.

An employee may have to take time off to care for an immediate family or household member who is sick or injured or help during a family emergency. This is known as carer’s leave but it comes out of the employee’s personal leave balance.

Immediate family members or household members

An immediate family member is a:

  • spouse or former spouse
  • de facto partner or former de facto partner
  • child
  • parent
  • grandparent
  • grandchild
  • sibling, or
  • child, parent, grandparent, grandchild or sibling of the employee’s spouse or de facto partner (or former spouse or de facto partner).

This definition includes step-relations (eg. step-parents and step-children) as well as adoptive relations.

A household member is any person who lives with the employee.

For more info on sick and carer’s leave, click here

Compassionate & bereavement leave

All employees (including casual employees) are entitled to compassionate leave (also known as bereavement leave).

Compassionate leave can be taken when a member of an employee’s immediate family or household:

  • dies or
  • suffers a life-threatening illness or injury.

Immediate family is an employee’s:

  • spouse or former spouse
  • de facto partner or former de facto partner
  • child
  • parent
  • grandparent
  • grandchild
  • sibling, or a
  • child, parent, grandparent, grandchild or sibling of the employee’s spouse or de facto partner (or former spouse or de facto partner).

This definition includes step-relations (e.g. step-parents and step-children) as well as adoptive relations.

Employees will be able to take compassionate leave for other relatives (eg. cousins, aunts and uncles) if they are a member of the employee’s household, or if the employer agrees to this.

Amount of compassionate leave

All employees are entitled to 2 days compassionate leave each time an immediate family or household member dies or suffers a life-threatening illness or injury.

The compassionate leave can be taken as:

  • ​a single continuous 2-day period, or
  • 2 separate periods of 1 day each, or
  • any separate periods the employee and the employer agree.

An employee does not accumulate compassionate leave and it doesn’t come out of their sick and carer’s leave (or annual leave) balance. It can be taken any time an employee needs it.

If an employee is already on another type of leave (e.g. annual leave) and needs to take compassionate leave, the employee can use compassionate leave instead of the other leave.

Payment for compassionate leave

Full-time and part-time employees receive paid compassionate leave and casual employees receive unpaid compassionate leave.

Full-time and part-time employees are paid at their base pay rate for the ordinary hours they would have worked during the leave.

This doesn’t include separate entitlements such as incentive-based payments and bonuses, loadings, monetary allowances, overtime or penalty rates.

Compassionate leave can’t be cashed out.

Notice and evidence

An employee taking compassionate leave must give their employer notice as soon as they can (this may be after the leave has started). The employee must tell the employer of the period, or expected period, of the leave.

An employer can request evidence about the reason for compassionate leave (eg. a death or funeral notice or statutory declaration). This request for evidence has to be reasonable. If the employee doesn’t provide the requested notice or evidence, they may not get compassionate leave.

An award or registered agreement can include terms about the kind of evidence that an employee must provide to get compassionate leave.

For more info on compassionate and bereavement leave, click here

Maternity & parental leave

Employees can get parental leave when a child is born or adopted. Parental leave entitlements include:

  • maternity leave
  • paternity and partner leave
  • adoption leave
  • special maternity leave
  • a safe job and no safe job leave
  • a right to return to old job.

What is parental leave?

Parental leave is leave that can be taken when:

  • an employee gives birth
  • an employee’s spouse or de facto partner gives birth
  • an employee adopts a child under 16 years of age.

Employees are entitled to 12 months of unpaid parental leave. They can also request an additional 12 months of leave.

Pre-adoption leave

Employees who are taking parental leave to care for an adopted child are also entitled to 2 days unpaid pre-adoption leave to attend relevant interviews or examinations.

This leave can’t be used if an employer tells an employee to take another type of leave (eg. paid annual leave).

Who is eligible for parental leave?

All employees in Australia are entitled to parental leave.

Employees are able to take parental leave if they:

  • 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 (if the leave is taken after another person cares for the child or takes parental leave)
  • have or will have responsibility for the care of a child.

Casual employees

For casual employees to be eligible for unpaid parental leave they need to 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.

Having another child

Employees who have taken parental leave don’t have to work for another 12 months before they can take another period of parental leave with that same employer.

However, if they have started work with a new employer they will need to work with that employer for at least 12 months before they can take parental leave.

For more info on maternity and parental leave, click here.

While it is important to ensure your leave policies are in alignment with your business goals, it is also important that you consider the employee experience when designing your leave policy. Too many restrictions in their leave policy can end up frustrating your employees. Remain flexible and remember the importance of lifestyle for the younger generations when working it all out!

Keen for more advice? Check out Adzuna’s small business blog. You’ll find all the best small business advice in one place. There are plenty of valuable blog posts on everything from hiring the best employees to pricing your services.

One post we can recommend right now is this guide to hiring the best employees.

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