Managing Annual Leave


Now that winter is behind us, the days are getting longer, and hopefully warmer weather is on the horizon, your staff will be thinking about their summer holidays.

Employers are reminded to ensure that they have systems in place to ensure that when considering annual leave, they have sufficient cover to keep business operating over the summer period. While many businesses have an annual close-down over the Christmas / New Year period, for those that don’t, juggling staff leave at this time can be a challenge.

Employees are entitled to a minimum of four weeks annual leave a year. That entitlement becomes available after the employee has been with their employer for 12 months. A further entitlement falls due on each subsequent 12-month anniversary of the employee’s commencement date, or 12-months after the date the business uses for its leave year in those cases where a calendar year is used rather than the employee’s start date.

Employers often ask, “Can my employee use their leave before their entitlement date?” This will depend on what your employment agreement says. Some employment agreements may allow an employee to use leave as it accrues. Other’s will say it can only be taken when the entitlement falls due. Yet again, other agreements might allow anticipation of annual leave at the employer’s discretion. When considering any request to use leave before it is due, employers must first look at what their employment agreement says and then be guided by that.

If an employment agreement is silent on anticipation of leave, then the employer may exercise their discretion. When approving anticipated leave, you need to be conscious of whether the employee has sufficient leave accrued to cover the request. If they don’t, you will need to inform the employee that if their employment ends, for any reason, before they have accrued sufficient leave to cover their anticipated leave that the employee will need to refund the employer the difference between what has accrued and what was taken.

It would pay, to ensure consistency and fairness to all employees, to have a policy that sets out how requests for anticipation of annual leave are treated. For example, a policy may say anticipated leave will only be considered if that does not affect the ability of staff who have a current entitlement to take their leave.

We would also recommend that any anticipation of leave be restricted to no more than a quarter of a person’s entitlement. This is to ensure that the employer is not indirectly putting a barrier to the employee taking a two-week break for rest and recreation in their next leave year and, if you have a close-down period, that the employee retains sufficient leave to cover that close-down.

To help you manage an influx of leave applications over the leave year, having a policy that addresses how you determine how those requests will be considered can go some way to taking away debate and argument over who gets and doesn’t get their leave approved.

Things to consider are:

  1. When did the employee last take leave? If not for some time, then you may consider their request has a high approval priority than someone who has recently taken leave.

  2. If your business remains open over the Christmas/New Year period, another consideration might be who had that period off last time. If a person worked the previous Christmas/New Year period, then their request may get a higher approval priority over someone who had the period off on leave last time.

  3. A policy could direct staff who wish to take leave over Christmas/New year to apply by a certain date (for example by 31 October) otherwise their request for leave may not be approved.

  4. You could operate a first in first considered approach to leave, balanced with the considerations at point 1 and 2 above.

  5. Where you have an annual close-down, ideally your employment agreement will state that staff must take annual leave during this period. Where a new employee started less than 12 months before a close-down period, your employment agreement and/or policy could provide for the employer allowing the employee to anticipate leave for the period so that they are not on leave without pay.

Your employment agreements and leave policy should clearly state that employees are expected to take their leave within 12 months of the entitlement falling due. You should also state that where an employee has not planned to take their leave, that the employer may, with 14 days’ notice, require the employee to take their leave, including directing when that leave will be taken.

If an employer does not manage their employees’ leave, then that leave remains as a liability against your business, and can build very quickly. In New Zealand, annual leave does not expire until it is taken. It is therefore important to work with your employees to ensure they have plans in place as to when the leave will be taken.

Trips and Traps with Leave

Once leave has been approved, the Employer cannot unilaterally cancel that leave. So, if your circumstances change and you need someone to return from leave early, you can only do this with their approval. Equally, if the employee wishes, due to a change in their personal circumstance, to return to work from leave early, they can only do so if you agree.

If either party does not agree to an early end to a period of leave, then the annual leave remains in place.

Where an employee, falls sick or is injured during a period of annual leave, that part of the leave that is affected by the illness or injury may be converted to sick leave, but only with the employer’s agreement.

However, if an employee suffers a bereavement while on leave, then then the employer must allow the affected part of the leave to be taken as bereavement leave. In the case of bereavement, the employer’s agreement is not required.

If the employee, or someone who is dependent on them, becomes sick or injured before commencing their annual leave, even though the leave has been agreed, the employer must allow the employee to take sick leave for the affected period.

If you need advice on how to manage the leave of your employees, contact Tony today for a free no-obligation chat.


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