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Do extra hours count towards annual leave accrual?

If part-time employees work extra hours, does it count towards annual leave?
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Do extra hours count towards annual leave accrual?

Do extra hours count towards annual leave accrual?

2 June 2021

If part-time employees occasionally work extra hours, does this time count towards annual leave accrual?

Q Our company employs several part-time employees who are not covered by a modern award or an enterprise agreement. Their contracts of employment provide for a three-day week, however they occasionally work an additional day because of the nature of the business. One employee has queried why the additional hours don't count towards accrual of annual leave.

Does annual leave accrue based on the ordinary hours provided in their contract of employment or must the additional hours be included in the accrual of annual leave?
 
A An employee’s ordinary hours determine the rate at which the entitlement to annual leave accrues and also the entitlement to payment when annual leave is taken. Under the Fair Work Act (s20(1)), the ordinary hours of work for an award/agreement free employee are the hours agreed as such between the employee and his or her employer. This would be as per the terms relating to ordinary hours prescribed in the employee’s contract of employment.
 
If no such agreement has been reached on the employee’s usual hours of work, the ordinary hours of work for an award/agreement free employee are 38 hours for a full-time employee. In the case of a part-time employee, the Fair Work Regulation provides a formula to calculate the usual working hours for the purposes of calculating annual leave.


Fair Work Regulations 2009

Regulation 1.11 provides for the determination of hours when a part-time employee does not have usual weekly hours of work. To work out the usual weekly hours of work for an employee who has been employed for at least four weeks:
  • identify the total number of hours the employee has worked during the previous four completed weeks, and
  • divide the result by four.


Ordinary pay

Annual leave is payable at an employee’s ‘base rate of pay’. If an employee changes the basis of their employment, there is no loss of accrued leave, although the future rate of accrual will be different, based on the employee’s new ordinary hours of work.
 
The bottom line: It is important an employer and a part-time employee agree on the number of ordinary hours and this is a term of the contract of employment. Failing to agree on usual hours of work will mean an employer may be required to recognise any additional hours worked.

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