Over a fifth of Australian employees have racked up four weeks of unused annual leave or more, according to a recent report. What implications might this have for organisations – and how should HR respond?

Australian employees are feeling reluctant to take annual leave due to rising workloads and financial pressures, according to a recent report by ELMO. 

ELMO’s latest Employee Sentiment Index, based on a survey of over 1000 Australian employees, reveals the average employee has accumulated almost 16 days of annual leave (15.7). Concerningly, more than one in five employees (22 per cent) has accrued four weeks or more of unused leave.

“We have seen an increase in workloads over the course of the past few years, particularly in the economic climate that we’re in where some businesses are trying to do more with less,” says Kate Wilkinson, Chief People Officer at ELMO. 

“[Many] employees are saying they’re too busy to take annual leave. And, if we drill down a little bit deeper, there are also concerns around job security.”

A breakdown of how much annual leave Australian workers are currently sitting on can be found below.

Older employees have accrued a higher number of annual leave days, with the average Baby Boomer and Gen X employee approaching the annual entitlement in unused leave (Baby Boomers 19.9 days, Gen X 20.3 days), while Millennial and Gen Z employees have accrued 14.9 days and 8.8 days respectively.

“The report [demonstrates] Gen Z being a more mobile workforce, meaning they would move for new opportunities and sometimes have less tenure with an organisation, which would avoid building up that leave liability,” says Wilkinson. “Whereas Baby Boomers and Gen X tend to have a longer tenure.”

Research shows Gen Z employees place a greater emphasis on work-life balance and boundaries than their older counterparts, which could also be contributing to lower leave balances.

Why are employees avoiding annual leave?

Just over three in five employees (61 per cent) report barriers preventing them from taking leave, with the most commonly cited reasons being a heavy workload (21 per cent), saving leave in case of an emergency (20 per cent) and not being able to afford to go away on holiday (18 per cent).

Unsurprisingly, the impact of the current economic climate was a key theme that emerged in the responses. In particular, employees are feeling the impact of cost-cutting measures taken by employers over the past quarter, including reductions in headcount.

Forty-three per cent of employees report that their workload has increased over the past three months – three percentage points higher than this time last year. Among those whose workload has increased, 41 per cent attribute it to a decrease in headcount and say the volume and nature of the work remains unchanged.

As a result, supporting employees with workload management is an important first step to building a healthier culture around taking leave, says Wilkinson – and this starts with middle managers.

“Education around employee wellbeing is really important, and so is training leaders to be able to look at how they can support their teams efficiently with workload spread,” she says.

“A strategy I’ve seen work really well is a quarterly performance management discipline. For some people, work is a bit like being on a hamster wheel going round and round. But if you’ve got clear goals and a quarterly cadence in place where managers are in touch with their team members, and that’s consistent across the workforce, then you see consistent habits created. And team members are okay with taking leave, they’re supportive of each other taking leave, and the business is supportive, [because] the goals are still being met.”

“Annual leave isn’t just for going on a vacation. We learned some good habits [around this] during COVID, and we shouldn’t lose those, because it’s so important to have downtime and to switch off.” – Kate Wilkinson, Chief People Officer, ELMO

Employees express growing concerns around job security

As mentioned earlier, concerns about job security are also a significant driver of employees’ reluctance to take annual leave. Survey respondents were particularly worried about the prospect of redundancies in the approaching months. 

Thirty-eight per cent of employees said they felt they needed to work longer and harder to keep their jobs secure in the current climate.

Based on previous editions of ELMO’s Index, these concerns have grown since last quarter (see chart below). 

According to AHRI’s latest Quarterly Work Outlook, one-quarter (25 per cent) of employers expect to make workers redundant in the December 2024 quarter, which is modestly lower than in the September 2024 quarter (27 per cent), but still above the survey’s historical average (23 per cent).

To prevent job security concerns holding employees back from taking leave, middle managers should be equipped with the tools to address employees’ concerns during their regular check-ins. 

Openly encouraging employees to take their holidays also sends a clear message that their wellbeing is a priority for the company and helps eliminate any stigma around taking leave, particularly for the six per cent of employees in ELMO’s research who say their organisation’s culture discourages taking leave.

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How can employers keep leave hoarding in check?

For some employers, overflowing leave balances could represent a ticking time bomb. Excess annual leave accrual can be a serious financial burden, with untaken leave recorded as a liability on the balance sheet – not to mention the costs of leave loading.

The average full-time employee has about 16 days of unused leave, which adds up to an average of more than $7000 in annual leave pay for those entitled to leave loading.

To ease this burden, some employers may consider mandating annual leave for employees who have accumulated over a certain amount. Whether employers are legally allowed to mandate annual leave is dependent on the individual employment contract and/or the relevant award or enterprise agreement. 

However, encouraging employees to take leave at a time that suits them tends to be a better approach, says Wilkinson.

“If someone’s feeling that they’re too busy and the workload just isn’t stopping, it’s on the leader to be able to support them with how that can be removed or spread across the team, so the employee can go on leave,” she says. “Rather than directing someone to take annual leave, it’s about being supportive and creating an environment where they feel free to go and take their annual leave.”

Even in an economic climate where many employees feel unable to afford a holiday, annual leave should always be framed as a non-negotiable, she says.

“Annual leave isn’t just for going on a vacation. We learned some good habits [around this] during COVID, and we shouldn’t lose those, because it’s so important to have downtime and to switch off.”