Holidays are an important part of the working world; if no one ever took holidays, we probably wouldn’t live to an average age of 85. Making sure your employees get breaks is important, and so is understanding leave entitlements. This article explains when and why annual leave needs to be paid.

What is annual leave?

Annual leave, also referred to as ‘holiday pay’, is an accrued number of hours which any employees, other than casual workers, are entitled to claim. This allows employees to take time off work while still being paid. Annual leave is one of 11 minimum employment standards which must be provided to employees as mandated by the Fair Work National Employment Standards.

How much annual leave are employees entitled to?

The National Employment Standards dictate that at a minimum annual leave for full-time and part-time employees are to receive the equivalent of 4 weeks of ordinary work per year. This means that each year, employees are entitled to 4 times their average working week in annual leave. For example, an employee who works 38 hours per week will accrue 152 hours of annual leave over the course of a year.
Shift workers, classified as employees who work rostered shifts on any day of the week at any time, are entitled to 5 weeks of annual leave per year.

How is annual leave calculated?

Annual leave must begin from the first day an employee begins working for your business. As mentioned previously, full-time and part-time employees are entitled to a minimum rate of 4 weeks paid annual leave per year. However, annual leave is calculated and accrued daily.

Daily annual leave accumulation can be calculated using the following formula:
Total annual leave ÷ 52 weeks = annual leave per week
Annual leave per week ÷ 5 days = annual leave per day

How to manage annual leave

Managing your employee annual leave balances and payments doesn’t need to be difficult. Using cloud based software like Xero allows employees to view, request and manage their own annual leave. This type of software also allows you to view each of your employees’ leave balances, requests, and approved time off. By automating the annual leave process, you are free to focus on business growth.


Understanding your annual leave requirements and your employees entitlements is just as important as taking some time off. Without proper management, you could find yourself giving your employees too much or too little annual leave, and neither would be good for your business. For more in-depth advice on how to properly manage annual leave in your business, contact the QCA team.