An employer’s guide to understanding leave entitlements, reducing excessive leave balances and managing long-term absences

29 September 2021

Given the numerous lockdowns, restrictions and uncertainty faced by employees as a result of the COVID-19 pandemic, many employers are finding themselves carrying the financial burden of increasing leave accrual - or, in a position where they are struggling to cover gaps due to long-term absences. Understanding leave entitlements and what an employer can and cannot do in this space is vital. The Victorian Chamber encourages businesses to act now to ensure responsibilities and obligations are understood.


Personal and annual leave entitlements have been in the spotlight recently, with employers facing rising annual leave balances and fielding numerous requests for time off due to COVID-19 vaccination appointments. Understanding your rights and responsibilities will facilitate smooth discussions with employees when navigating requests. It will also help you plan and understand when and how you can reduce leave balances. 

Annual leave

Under the Fair Work Act 2009 (Cth) (“FW Act”), paid annual leave may be taken for a period agreed between an employee and employer. An employer must not unreasonably refuse a request to take paid annual leave.

Reducing leave balances

High leave balances are known to increase business liabilities and can be an indicator staff are not taking breaks from work, even if work is being performed from home.

To begin the process of reducing leave balances, consider the barriers preventing staff from taking time off. If employees are required to give long notice periods when requesting leave, consider relaxing this requirement.

If employees are reluctant to take leave because of lockdowns or other restrictions, talk to your staff about the benefits and importance of taking time away from work, especially in unusual circumstances. Managers are encouraged to share their personal stories about taking leave, how they spent that time and the benefit of taking a break, relaxing and feeling refreshed.

Directing an employee to take leave

Most modern awards have clauses which provide employers with the opportunity to direct employees with ‘excessive’ leave balances to take annual leave. The term ‘excessive’ is defined within the clause and will generally require the employee to have more than eight weeks of paid annual leave accrued (or 10 weeks for a shift-worker).

Temporary ‘shut-down’

Some businesses decide to close their doors over the Christmas period. This can help reduce leave balances and gives employees an opportunity to take a break and switch off. To understand whether you can impose a ‘shut-down’ and require employees to take leave, carefully read the applicable modern award or enterprise agreement.

Victorian Chamber tips:

  • Have an up-to-date annual leave policy outlining the entitlement and procedure for applying for leave.
  • Talk to your employees about taking leave and the benefits of time off.
  • Know your modern award and its requirements for directing employees to take leave.
  • Invest time now to explore your options if you are considering a Christmas shut-down.
  • Have courage to address issues when they arise or seek assistance to do so.

Personal leave

An employee may take paid personal/carer's leave if the leave is taken:

(a) Because the employee is not fit for work due to a personal illness or personal injury (for example, if they have contracted COVID-19, or if they are experiencing vaccine side effects).

(b) To provide care or support for a member of the employee's immediate family or a member of the employee's household who requires care or support because of a personal illness or injury (for example, if they are injured and not in hospital); or due to an unexpected emergency.

It can be challenging for businesses to navigate a situation where an employee has a long-term illness or has been absent from the workplace for a long period of time. There are instances when it may not be possible for the employee to return to the workplace, for example where they cannot fulfil the inherent requirements of the role, and/or where a return poses a health and safety risk to others including clients, customers and staff.

However, strategic decisions should not be made lightly as discrimination legislation, including the possibility of claims of adverse action under the FW Act, present numerous risks of employment related claims.

If you are managing a long-term absence, consider the matter in its entirety. Flexible working arrangements can be a way to assist the employee in returning to work. Be sure to work with the employee to understand what can be achieved.

In circumstances where an employee has been absent for a protracted period and has no prospect of returning to their role, a business may need to consider terminating the employment relationship. A number of legislative considerations and requirements apply and caution should be exercised. Relevant factors to consider include:

  • The length of the absence.
  • The nature of the injury/illness.
  • The worker’s capacity for their pre-injury role, and a timeline for return.
  • Whether the worker is fit for their pre-injury role and whether reasonable adjustments may assist.
  • How long the worker has been employed by the business.
  • The size of the business and its ability to accommodate the absence from work.

Victorian Chamber tips:

  • Have an up-to-date personal leave policy which includes the procedure for applying for leave.
  • Review the length of absence of your employees and consider planning a welfare discussion to identify a timeline for return to work.
  • Seek advice before terminating an employee for long-term absence.
  • Be open minded to adjustments suggested by medical practitioners and whether they are reasonable.

We are here to help

Regardless of the size of your business, your industry or the issues faced, our Workplace Relations Consultants are experienced change management experts who can help you every step of the way. Contact our Workplace Relations Advice Line on 03 8662 5222 to speak to our team about handling employee reluctance to return to the office, or to discuss the process for handling a grievance or complaint.

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