Leave obligations for employers and what your business must get right

If you employ staff in Australia, leave is not optional goodwill. The Fair Work Act 2009 (Cth) (the Fair Work Act) sets out a floor of leave entitlements, known as the National Employment Standards (the NES), that applies to every employer and employee in the national workplace relations system. Award and enterprise agreement terms can add to those entitlements but cannot reduce them, and neither can an employment contract.

This guide sets out the leave duties that apply to your business, the records you must keep, what happens if you fall short, and where a workplace lawyer earns their keep.

Who the leave obligations apply to

The NES applies to all employees covered by the national system, which is most private-sector employers in Australia. There is no headcount threshold that lets you off the hook: a business with two staff owes the same NES leave obligations as one with two hundred.

A few scoping points matter for small business:

All employee types are covered: Full-time, part-time and casual employees all have NES leave rights, although casuals generally do not accrue paid annual leave or paid personal/carer's leave.
Awards and agreements layer on top: If a modern award or enterprise agreement covers your employees, check it before approving leave. It may add entitlements, such as annual leave loading, and it will govern things like notice periods and cashing out.
Small business employers get some phasing but no exemption: For example, the 10 days of paid family and domestic violence leave applied to larger businesses from 1 February 2023 and to small business employers from 1 August 2023. From that date the entitlement has applied across the board, so size is no longer a reason to withhold it.

If you are unsure whether the national system covers you, check with the Fair Work Ombudsman before assuming the NES does not apply.

The leave entitlements you must provide

The NES leave floor, in Part 2-2 of the Fair Work Act, is:

Annual leave: four weeks of paid annual leave per year of service for full-time and part-time employees, and five weeks for shiftworkers defined as such under an award or agreement (s 87). It accrues progressively and rolls over year to year.
Personal/carer's leave: 10 days of paid personal/carer's leave per year, accruing progressively according to ordinary hours (s 96). It covers the employee's own illness or injury and caring for an immediate family or household member who is ill, injured or affected by an unexpected emergency (s 97). Casual employees get two days of unpaid carer's leave per occasion instead (s 102).
Compassionate leave: two days per occasion when a member of the employee's immediate family or household dies, or contracts a life-threatening illness or injury, or when there is a stillbirth or miscarriage (s 104). It is paid at base rate for non-casuals and unpaid for casuals (s 106).
Parental leave: up to 12 months of unpaid parental leave, with a right to request a further 12 months (ss 70 and 76). The extension request must be in writing and given at least four weeks before the current period ends.
Paid family and domestic violence leave: 10 days per 12-month period for every employee, including casuals and part-timers, available in full at the start of each 12-month period and not accumulating year to year (s 106A). An employee takes it when they are experiencing family and domestic violence and need to do something to deal with its impact, such as attending court, arranging safety or seeing a professional (s 106B).
Community service leave: unpaid time off for eligible community service activities such as emergency management or jury service (s 108). For jury service, non-casual employees must be paid their base rate for ordinary hours, less any jury service pay they receive (s 111).
Public holidays: an entitlement to be absent on a public holiday in the place where the employee is based, and to be paid for it if they would ordinarily have worked (s 114). An employer may request work on a public holiday, but the request must be reasonable, and the employee can refuse if the request, or their refusal, is reasonable on factors such as the nature of the work and the employee's personal circumstances.

You can offer more generous leave by policy, contract, award or enterprise agreement. You cannot offer less than these minimums.

Track and pay leave correctly

The most common compliance failures are arithmetic, not legal. Leave must be tracked accurately and paid at the right rate:

Accruals: Annual leave and personal/carer's leave accrue progressively during each year of service, so an employee's balance grows each pay period, not just on their anniversary. Record each accrual and each day taken, and show balances when the employee asks.
Payment rates: Annual leave is paid at the employee's base rate of pay for their ordinary hours for the period of leave (s 90), excluding extras like overtime and penalties unless an award or agreement says otherwise. If an award or enterprise agreement provides annual leave loading, typically 17.5% in many awards, pay it on top. When employment ends, accrued but untaken annual leave must be paid out at the same rate the employee would have received had they taken it, including any loading (s 90(2)).
Personal/carer's leave: Paid at base rate for the ordinary hours the employee would have worked (s 99). It does not attract a loading unless the award says so.
Payslips: Give a pay slip within one working day of pay day, with the content required under s 536 of the Fair Work Act. Showing leave balances on payslips is best practice, not a legal requirement, but you must provide balances on request.

Set evidence rules that are defensible

You may ask for evidence of leave, but only to the standard set in s 107(3) of the Fair Work Act: evidence that would satisfy a reasonable person that the leave was taken for a permitted reason. For personal/carer's leave that is typically a medical certificate or statutory declaration confirming incapacity, which is enough. You do not need, and should not demand, a diagnosis or the treating doctor's clinical notes.

The rules of thumb that keep you out of trouble:

Apply the same evidence threshold to everyone. If one team leader demands a certificate after a single day and another accepts a text message, you have a consistency problem, not a policy.
State the threshold in your leave policy, for example a certificate for absences of more than one day or around public holidays, and follow it.
Notice of leave must be given as soon as practicable, which can be after the leave has started (s 107(1)-(2)).
For family and domestic violence leave, the same reasonable-person evidence standard applies. What is reasonable is different in that context: a statutory declaration may be all you can expect, and the Fair Work Act is explicit that the evidence must not be an unreasonable burden on someone in crisis.

Handle annual leave requests, directions and cashing out

Most disputes about annual leave come down to three decisions:

Refusing a request: An employer must not unreasonably refuse a request to take annual leave. Reasonableness is judged on operational needs, the timing of the request, whether other employees are already on leave, and any agreement about when leave can be taken. A refusal should be explained and, where possible, an alternative offered.
Directing leave: You may require an employee to take annual leave in limited circumstances. Under s 93 and s 94(5), a direction is permitted only where it is reasonable, such as a genuine shutdown period or where an employee's accrued balance is excessive. Check what your award or agreement says first, because many set out notice and consultation steps for shutdowns.
Cashing out: Cashing out annual leave is lawful but tightly constrained. If an award or agreement permits it, its terms apply, and they must require a separate written agreement for each cash-out, a remaining balance of at least four weeks afterwards, and payment of at least the amount the employee would have received had they taken the leave (s 93(2)). For award/agreement-free employees the same protections apply directly under s 94. Never pressure an employee to cash out: the agreement must be genuine, voluntary and in writing.

Protect confidentiality, especially for family violence leave

Leave records contain sensitive information, and some of it is regulated. Employee medical certificates should be stored securely and only accessed by those who need them. Where an employee takes paid family and domestic violence leave, the safety stakes are higher: an employer who discloses that an employee is experiencing family violence can put that employee at serious risk.

The Fair Work Act protects this zone directly. Pay slips must not mention paid family and domestic violence leave at all: the amount paid must be recorded as ordinary hours or another type of payment (s 757BA and the rules under s 536). Keep FDV leave records separate from ordinary leave records, restrict access to them, and make sure payroll software does not label the leave on payslips. Train managers to hold these conversations privately and never to quiz an employee about the details of the violence.

Keep the records the law requires

Section 535 of the Fair Work Act requires you to make and keep employee records, including leave records, for seven years. The Fair Work Regulations 2009 (Cth) prescribe what those records must contain: for leave, the number of days of each type of leave taken and the balance of each entitlement, plus records of any leave the employee was entitled to but did not take.

The records matter twice over. First, the Fair Work Ombudsman can ask to see them. Second, if you are taken to court over an underpayment, a failure to keep proper records shifts the burden: under s 557C you may have to disprove the allegations rather than the applicant having to prove them. A clean, complete record is also your best evidence that a refusal or direction was reasonable.

The cost of getting it wrong

Contravening the NES is itself a civil remedy provision (s 44). The penalties in the s 539 table are expressed in penalty units, which are set under the Crimes Act 1914 (Cth) and currently sit at $330 per unit. For a single NES contravention an individual employer can be penalised up to 60 units, and a body corporate up to 300 units, with higher maximums where underpayments are involved. A court can also order back-pay, compensation and interest.

Beyond court penalties, the Fair Work Ombudsman has a graduated enforcement toolkit: compliance notices, infringement notices for record-keeping and payslip breaches, and enforceable undertakings. For intentional underpayments, the Fair Work Amendment (Closing Loopholes No. 2) Act 2024 (Cth) also introduced criminal offences for wage theft, and the 2024 amendments increased civil penalties for larger businesses. Each leave breach, such as each wrong payslip, can be a separate contravention, so a systemic payroll error multiplies quickly.

A compliance checklist for your business

Before your next pay run, work through this checklist:

Confirm which award or enterprise agreement covers each employee and check its leave terms before approving leave.
Track annual leave and personal/carer's leave accruals each pay period and keep records for seven years.
Pay annual leave at base rate, add any award loading, and pay out untaken annual leave on termination at the rate the employee would have received.
Apply one written evidence policy to all staff, capped at what a reasonable person would accept.
Treat cash-out agreements as voluntary, separate, written, and never below a four-week balance.
Keep family and domestic violence leave off payslips and out of sight of anyone who does not need to know.
Document refusals, directions and shutdown arrangements, with the reason recorded at the time.

When a workplace lawyer is worth the fee

You can run routine leave administration on your own with the Fair Work Ombudsman's tools. A workplace lawyer earns their fee when the stakes are higher: drafting a leave policy and employment contracts that sit correctly with your award, structuring a shutdown direction or redundancy process around accrued leave, defending a Fair Work Ombudsman investigation or adverse action claim, and advising on cashing out arrangements, excessive leave balances or an employee who cannot return from sick leave.

The leave duty that quietly catches small businesses

If there is one obligation that catches Australian small businesses by surprise, it is the interaction between annual leave loading and final pay. Many employers correctly pay loading while an employee is on leave but forget that accrued but untaken annual leave paid out on termination must also include that loading under s 90(2), even if the award or contract says nothing about it. The Fair Work Ombudsman is explicit that the final payment must be the same as the employee would have received had they taken the leave. Add loading to a final payout, reconcile it before payroll runs, and you have closed the gap that produces the most underpayment notices for leave-related claims. If you are not certain your payroll covers it, that is the first thing to check this week.