When a part-time employee becomes full-time, how does it affect annual leave entitlements? 

Let’s look at an example. An employee who previously worked 24 ordinary hours per week now works 38. They take four weeks’ annual leave and then queries why their annual leave balance has been docked 152 hours. 

The employee presumed their annual leave balance (and her personal/carer’s leave balance) would be adjusted to equate to their full-time employment.  

The scenario raises two questions: 
1. What happens to the annual leave accrued as a part-time employee – does it convert to full-time, or does the current balance carry over?  
2. At what rate will the employee be paid if taking annual leave in the future? 

 

Ordinary hours 

An employee’s ordinary hours determine the rate at which annual leave accrues and the entitlement to payment when annual leave is taken. For example, a part-time employee whose ordinary hours each week are 24 hours will accrue two weeks’ leave (48 hours) over a six-month period, while a full-time employee whose ordinary hours each week are 38 will also accrue two weeks’ leave (76 hours) over the same period. 

Leave is payable at an employee's 'base rate of pay' unless an applicable modern award or enterprise agreement says otherwise. If an employee changes the basis of their employment, there is no change to their balance of accrued leave. However, the future accrual rate will be different based on the employee's increased number of ordinary hours. 

The Fair Work Act (s87(2)) states that annual leave accrues progressively according to an employee’s ordinary work hours and is cumulative.  

In the above example, during the employee’s part-time employment, the accrual rate was at the equivalent rate of 96 hours per year (based on a 24-hour week). From the start of full-time employment (June 1), the employee will accrue leave at the equivalent rate of 152 hours per year. 

For example, if the employee had six months' service as a part-time employee (24 hours) and six months' service as a full-time employee (38 hours), the total accrual of annual leave after 12 months' service would be 48 hours (representing six months' accrual at part-time hours) + 76 hours (representing six months accrual at full-time hours). This means the employee will have an accrual balance of 124 hours after 12 months' continuous service with the employer. 

In this case, when the employee takes four week’s paid annual leave, she will be entitled to be paid for 38 ordinary hours at her base rate of pay (or ordinary pay if prescribed by the applicable award or agreement) for each week of annual leave, with 152 hours to be deducted from her annual leave balance. 

The principle of accruing paid annual leave also applies to personal/carer’s leave. 

 

The bottom line

An employee’s ordinary hours determine the rate at which the entitlement to annual leave accrues. Payment for a period of annual leave is at an employee’s base rate of pay unless otherwise provided by the applicable modern award or enterprise agreement.