Leave Entitlements Record Keeping

Leave records rarely feel urgent. Nobody chases them week to week, the software seems to be counting something, and the balance only matters when someone asks for it. Then an employee resigns, the untaken annual leave becomes a dollar figure on the final pay, and the quality of years of record keeping is tested in a single afternoon.

Under the National Employment Standards, leave entitlements accrue automatically for permanent employees whether or not anyone is recording them. The record does not create the entitlement — it just determines whether you can prove what is owed, or end up negotiating from memory.

What you need to record

• Accruals and balances for annual leave and personal/carer's leave — the rate at which leave accrues, leave actually taken, and the running balance for each employee.
• Requests and approvals in writing, so a taken day and an approved day are the same day.
• Cash-out agreements where an award or agreement permits cashing out, including the written agreement the rules require.
• Long service leave. In Victoria this sits under the state long service leave legislation, accrues over a long period of continuous service, and can survive changes of business ownership — check the current Victorian rules for the exact milestones and rates rather than relying on folklore.

Leave is a liability, not just an HR record

Every hour of accrued leave is money the business owes. In the accounts it belongs in a leave provision, and it behaves like a debt with a variable interest rate: it is paid out at the employee's rate when the leave is taken or paid, not the rate when it accrued. Every pay rise silently revalues the whole balance. A business with long-tenured staff and no leave provision in its accounts is understating what it owes — which matters for cash planning, for lending, and very sharply in a business sale, where a buyer's accountant will find it in the first pass.

Casual employees are different, not exempt

Casuals generally do not accrue paid annual or personal leave. Instead they receive a casual loading on top of the base rate — the percentage is set by the relevant award, so check the current figure for yours. That does not switch off record keeping: hours worked still matter, unpaid leave types still exist, and in Victoria long service leave can still accrue for regular, long-serving casuals — another point worth checking against the current rules rather than assuming.

What we commonly see go wrong

• Leave tracked on a spreadsheet that lives apart from payroll — or in a manager's head — so the payslip balance and the "real" balance drift apart for years.
• Accrual settings wrong in the software: part-timers accruing at full-time rates, or new employees set up with no accrual at all.
• Long service leave forgotten entirely until a long-serving employee asks, by which point the liability is large and unbudgeted.
• Final pays that miss annual leave loading where the award requires it on termination, or that tax unused leave incorrectly.
• Negative leave balances allowed to drift with nothing in writing, which becomes an argument about money the day the employment ends.

A worked example

As an illustration: a retail business runs its pays through payroll software, but leave lives on a spreadsheet the previous manager built. An employee of nine years resigns. The spreadsheet shows one balance, the employee's own diary suggests a larger one, and the payroll file was never set up to accrue leave at all. With no reliable record, the business ends up paying close to the employee's figure to settle the matter — and then discovers a long service leave entitlement nobody had budgeted for on top. A liability that had been building for nine years arrived in a single pay run, at the current pay rate, as a surprise.

When to get help

If leave lives outside your payroll software, if balances on payslips do not match what staff believe, or if anyone in the team is approaching a long service leave milestone, it is worth a one-off tidy-up: set the accruals correctly, reconcile the balances to history once, and let the software carry it from there. It is a small job compared with reconstructing nine years of leave under pressure.

Do casual employees get any leave at all?

Casuals generally do not accrue paid annual or personal leave — the casual loading compensates for that. But some entitlements can still apply, including unpaid leave types and, for regular long-serving casuals in Victoria, potentially long service leave. Check the current rules rather than assuming casual means no leave.

Can an employee take more leave than they have accrued?

Only if you agree to it, and you should put the agreement in writing, including what happens to a negative balance if they leave. Unwritten negative balances are one of the most common final-pay disputes we see.

Does accrued leave really need to appear in my accounts?

If you want the accounts to tell the truth, yes. Accrued leave is money the business owes at current pay rates, and a leave provision is how the balance sheet reflects it. It matters most for cash planning and whenever the business is being valued or sold.