With the Christmas season quickly approaching, many businesses will be preparing for their annual shutdown. But how should you handle annual leave during this period? Can you require an employee to take annual leave, and what if an employee has accumulated a large amount of it?
In this article, we’ll explore whether you can compel an employee to take annual leave and offer suggestions for managing this situation.
What is a Shutdown?
A shutdown occurs when a business temporarily closes, often during slower periods like Christmas and New Year. Whether an employee can be required to take annual leave during a shutdown depends on the applicable award or agreement. If the award or agreement allows it, you can direct employees to take leave during these periods.
New Shutdown Rules for Awards
Starting in June 2023, many awards have updated rules on taking annual leave during shutdowns, so it’s important to stay informed about these changes.
What is Excessive Annual Leave?
Employees generally accrue a minimum of 4 weeks of paid annual leave per year, or 5 weeks for some shift workers. This leave accumulates as they work more hours, and any unused leave rolls over to the following year. Excessive annual leave is defined as having more than 8 weeks (or 10 weeks for shift workers) of accrued leave.
Can You Force an Employee to Take Annual Leave?
Yes, in certain circumstances, you can direct an employee to take annual leave, such as:
- During a business shutdown (e.g., Christmas/New Year)
- When an employee has accrued excessive annual leave
The ability to direct an employee to take leave depends on the terms of the relevant award or agreement. However, it’s always best to start by discussing the situation with your employee. A friendly, open conversation about their accrued leave may lead to a mutually beneficial solution. Often, these matters can be resolved with a positive and constructive discussion.
How to Enforce Annual Leave
If you’re unable to reach an agreement and the employee refuses to take their excess leave, there are steps you can take. Most modern awards allow employers to direct employees with excessive leave balances to take paid leave, as long as it’s done in writing. Here’s what to keep in mind when issuing a direction:
- The direction must be in writing (e.g., email or letter).
- The employee must retain at least 6 weeks of leave after taking the directed leave.
- The leave period must be at least 1 week long.
- The leave must begin no sooner than 8 weeks and no later than 12 months from the date the notice is given.
- The direction must not conflict with any other agreed leave arrangements.
Managing Excessive Leave
If an employee has more than 8 weeks of accrued annual leave, you can require them to take it, provided the direction is in writing. The specific rules may vary depending on the award covering their role. Since excessive leave can become a financial burden for the business, it’s wise to address this sooner rather than later. Allowing leave balances to build up can also leave you short-staffed if employees choose to cash out their leave or take it all at once.
Next Steps
Encouraging employees to take long weekends or short breaks throughout the year can help avoid a backlog of leave requests during busy times. This can reduce financial liabilities, maintain productivity, and improve employee wellbeing. Remember, an open conversation is the first step to reaching an agreement on managing accrued or excessive leave.