Keep lines of communication going, if the leave is growing

Debra Leach

All permanent employees become entitled to four weeks of annual leave after 12 months of continuous employment. They will accrue their leave over the first 12 months of employment — for employees who have four weeks of leave, it is accrued at 1.66 days per month.

An employer can offer more than the minimum annual leave entitlement; some offer five weeks, accrued at two days per month.

Employers are not legally obliged to allow an employee who has worked for them for less than 12 months to take accrued leave, but most good employers will allow this. Similarly, if your employee has used all their entitled leave and is accruing leave, you do not have to approve their leave.

Annual leave is a legal entitlement for all employees and if they do not take all their leave in one year it is rolled over to the next year. If you do not record your employee’s annual leave days and have no record of their balance, how do you know what they have taken or what they are entitled to take? We have had employers contact BDO for advice around employees who have resigned and say that they have over 15 weeks entitled annual leave owing.

Employers have told us they have not kept records of annual leave so don’t have any proof of any annual leave taken. This obligation falls on the employer, not the employee. This creates a large financial and employment compliance risk for employers. There are recent Employment Court rulings where employees have received high payouts of annual leave because the employer could not prove it was taken.

Annual leave is generally taken at a mutually agreed time between employer and employee. If your employee has a lot of entitled leave you should meet with them to decide when they want to take the leave; they may have an overseas trip coming up that they want to use it for. Keep the lines of communication going if the leave is growing.

Employers can make employees take entitled annual holidays if they cannot reach agreement with their employee about when annual holidays will be taken. They will need to give the employee at least 14 days’ notice before the start of the enforced leave.

Again, you should talk to your employee and see if you can agree that they take maybe one day a week for the next six months, or have Friday and Monday off for the next three months.

Q: Do I need to pay out all Annual Leave when an employee resigns?

Yes you do — keeping accurate records of annual leave taken will help with this.

Q: Can an employee “cash up” all entitlements?

No — employees can only cash up one week for each entitlement year.

Q: Can employees “gift” their leave to other employees?

Not usually as this is part of the employment entitlement, although some employers may have this as part of their employment contract.

Q: Can I make an employee take accrued leave?

No, you can only make them take entitled leave.

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