Annual leave in Australia: NES entitlements, leave loading, and public holidays in 2026

Under s 87(1) of the Fair Work Act 2009, every national-system employee other than a casual is entitled, for each year of service, to:

• 4 weeks of paid annual leave; or
• 5 weeks where a modern award or enterprise agreement defines the employee as a shiftworker for NES purposes, or where an award-free employee meets the s 87(3) shiftworker criteria (employment in a 24/7-rostered enterprise, regular rostering on those shifts, and regular Sunday/public-holiday work).

Accrual is progressive during a year of service according to ordinary hours of work, accumulates from year to year without expiry, and continues to the termination date. Casuals are excluded  and receive a 25 % casual loading in lieu of leave and several other NES benefits, under the revised casual definition that operates from 26 August 2024 (25 February 2025 for small businesses).

Continuous service under s 22 is an unbroken period of employment, excluding unauthorised absences and most unpaid leave or unpaid authorised absences. Excluded periods do not break continuous service but do not count toward its length. On a transfer of business under Part 2-8, the new employer must recognise prior service for most NES purposes; whether accrued annual leave transfers depends on whether the new employer is an associated entity or has agreed in writing to recognise it. Where prior service is not recognised for annual leave, written notification to the employee is required.

Section 90(1) requires annual leave to be paid at the employee’s base rate of pay for ordinary hours. The s 16 definition of base rate excludes overtime, penalty rates, loadings (including casual loading), allowances, and incentive-based payments and bonuses. The ordinary-hours cap is 38 hours per week. Part-time employees are paid at the same base rate, with entitlements calculated pro rata.

The 17.5% annual-leave loading originated in 1970s National Wage Case decisions as compensation for award workers losing overtime and shift penalty earnings while on leave. It is not a statutory entitlement under the NES; it applies only where the modern award, enterprise agreement, or employment contract provides for it. Over 120 modern awards apply across Australia’s national system, and multiple awards can apply within one workplace. The standard calculation is:

Annual leave loading = base weekly rate × 17.5 % × number of weeks taken

For an employee earning A$80,000 per year, taking two weeks’ leave: weekly base = A$1,538.46; two-week base = A$3,076.92; loading = A$538.46. Many awards apply a higher-of test comparing 17.5 % loading against the weekend or shift penalty rates the employee would otherwise have earned across the leave period (not day by day).

Under ATO Superannuation Guarantee Ruling SGR 2009/2, annual leave taken is ordinary time earnings, so SG is payable at 12 %. Unused annual leave paid out on termination is not OTE, so no SG is payable on the payout. Annual leave loading taken during leave is OTE by default and attracts SG, unless the employer holds written evidence (award clause, agreement, or documented policy) that the loading is demonstrably referable to a notional loss of overtime opportunity. Without that documented overtime-loss nexus, SG applies.

PAYG withholding on unused leave at termination follows Schedule 7:

Leave loading paid out on normal termination is always withheld at 32 %, regardless of the employee’s marginal bracket.

Under sections 114-116, most employees other than casuals are entitled to be absent from work on public holidays. Employers may request employees to work, but employees can refuse unreasonable requests having regard to factors such as personal circumstances, caring responsibilities, workplace requirements, and notice given.

Where the employee does not work and the day would otherwise have been an ordinary working day, payment is at the base rate for ordinary hours. Where the employee does work, Modern Award penalty rates commonly apply at 2.0× to 2.5× ordinary rates.

In CFMMEU v OS MCAP Pty Ltd [2023] FCAFC 51, the Full Federal Court ruled that automatic rostering onto public holidays without a separate request-and-consent process contravenes section 114. OS MCAP had issued laminated roster cards at commencement showing public holidays as ordinary working days, but no separate request was ever made.

The Court held that a valid “request” requires the employer to genuinely ask the employee to work and provide a real opportunity to refuse. Retrospective roster allocation is not enough. EOR operators and payroll teams should ensure rostering systems generate a documented request-and-consent record before public-holiday work is scheduled.

Section 89(1) provides that where a public holiday falls during paid annual leave, the employee is taken not to be on annual leave for that public holiday. The leave balance is not reduced, and the day is treated instead as a paid public-holiday absence.

The Full Federal Court confirmed in CFMEU v Glendell Mining Pty Ltd that section 89 applies only to the NES minimum entitlement. Excess contractual leave above the NES minimum may still be deducted for public holidays depending on the wording of the relevant agreement or policy.

The seven national public holidays (New Year’s Day, Australia Day, Good Friday, Easter Monday, Anzac Day, Christmas Day, Boxing Day) apply in every jurisdiction. ANZAC Day falls on a Saturday in 2026; ACT, NSW, WA, and NT observe a substitute Monday (27 April).

Annual leave may be cashed out only where the modern award or enterprise agreement permits it and the s 93(2) NES conditions are met: the employee must retain at least 4 weeks of accrued leave after the cash-out, the cash-out must be evidenced in a signed written agreement (guardian signature for under-18s), payment must equal what the employee would have received had they taken the leave including loading, and the employer cannot coerce the cash-out. Most model clauses cap cash-out at 2 weeks per 12-month period. From 2016, the FWC inserted cash-out clauses into all modern awards following AM2014/47, so most award-covered employees now have a cashing-out right within those caps.

Most modern awards define excessive leave accrual as more than 8 weeks for non-shiftworkers or 10 weeks for shiftworkers. Where excessive leave exists, and no agreed plan is reached, the employer may issue a written direction requiring leave to be taken, subject to minimum notice of 8 weeks (and no more than 12 months in advance), a leave period of at least 1 week, the direction not reducing the balance below 6 weeks, and consistency with other agreed leave arrangements.

The FWC Full Bench standardised shutdown provisions across 78 modern awards in AM2020/99 (22 December 2022), with new clauses commencing 1 May 2023. The four pillars:

• Employers may direct employees to take paid annual leave during a temporary shutdown.
• Employers must provide at least 28 days’ written notice (shorter only by agreement with the majority of affected employees).
• The direction must be reasonable.
• Employees with insufficient leave may take annual leave in advance or unpaid leave only by written agreement; if neither is agreed, the employer must decide whether to allow the employee to work during the shutdown.

The structural change versus pre-2023 practice is that employers can no longer direct insufficient-leave employees onto unpaid leave unilaterally. Christmas and New Year shutdown cost modelling must account for short-tenure employees whose leave balances will not cover the closure.

From 1 January 2025, intentional underpayment of wages or entitlements is a criminal offence under ss 327A-327D, inserted by the Fair Work Legislation Amendment (Closing Loopholes) Act 2023. The offence covers wages and overtime, leave entitlements (including annual-leave loading and FDV leave), super contributions, and penalty rates and allowances under a modern award or EA. Maximum penalties are:

• Individuals: up to 10 years’ imprisonment, or fines of the greater of 3× the underpayment amount or A$1.565 million (5,000 penalty units).
• Body corporates: fines of the greater of 3× the underpayment amount or A$8.25 million (25,000 penalty units).

Proceedings can only be brought by the CDPP or AFP and must be commenced within 6 years (s 327C). Inadvertent errors are not captured by the criminal offence but remain subject to civil penalties and back-pay obligations. The Voluntary Small Business Wage Compliance Code and cooperation agreements with the Fair Work Ombudsman are the primary pathways for demonstrating good faith.

Australia has more than 120 modern awards, and identifying the correct one for each role is the dominant operational risk for foreign employers and EOR platforms. The four items most commonly missed:

1. 17.5 % annual-leave loading: adds approximately 1.35 % to annual gross payroll cost where all employees are award-covered and take 4 weeks’ leave (17.5 % × 4 ÷ 52).
2. Public-holiday cost layer: 11-13 days per year at base rate (non-worked) plus award penalty rates of 2.0-2.5× (worked).
3. Casual classification: 25 % casual loading in lieu of leave, with no annual or personal-leave accrual.

An Employer of Record absorbs award identification, leave-loading administration, public-holiday request-and-consent workflow, and LSL fund registration; an Agent of Record carries the parallel compliance surface for genuine independent contractors with an ABN.