Unions are demanding the Albanese government give workers an extra week of paid annual leave every year, the first increase in more than five decades, even as employers struggle to encourage people to run down their balances each year.
On Wednesday, the Australian Council of Trade Unions (ACTU) will use a government employment standards inquiry to push for an increase in standard annual leave from four weeks to five for full-time workers, despite Australian employees having about 160 million days of annual leave banked.
The change, if implemented, would be the latest in a series of industrial relations concessions made by Labor to the unions, such as multi-employer bargaining, gig economy dismissal protections and the right to disconnect.
But some experts caution additional paid leave entitlements, which would also increase to six weeks for shift workers under the union model, could be costly and fail to tackle other concerns around annual leave, including workers’ reluctance to take time off.
ACTU secretary Sally McManus said most workers were not alive the last time annual leave entitlements increased in Australia.
“Our annual leave has been frozen at four weeks since the mid-1970s, half a century ago,” she said, noting most European countries, including Austria, France and Spain, have already moved further.
In Austria and France, employees are entitled to a minimum of five weeks – or 25 working days – of paid leave, while in Spain, workers are entitled to about 22 working days of paid leave.
McManus said Australians work relatively long hours and that extra leave will decrease stress and burnout.
‘Australian workers already do an extra four and a half weeks of unpaid work on average every year. Getting back one of these weeks is fair and reasonable.’
ACTU secretary Sally McManus
“Australian workers already do an extra 4½ weeks of unpaid work on average every year,” she said. “Getting back one of these weeks is fair and reasonable. It will mean a better rested and happier workforce.”
Some Australian companies have already increased paid annual leave entitlements, with the SDA – which represents retail, warehousing and fast food workers – negotiating five weeks of annual leave at Bunnings, Apple and Ikea.
SDA national secretary Gerard Dwyer said agreements negotiated by the union at these companies helped improve work-life balance.
“Time is one of our most valuable commodities and our members have identified an extra week’s leave as a priority to assist them meet family demands,” he said.
Focus on leave balances
Bond University associate professor of organisational behaviour Libby Sander said Australia already has relatively generous paid leave entitlements and that an extra week could be a significant impost, especially for small and medium-sized businesses.
Instead, she said the focus should be on the annual leave balances that Australian employees accumulate – which amount to an average of 16 days banked leave per worker, according to a 2024 report by HR software company ELMO – and why they don’t feel like they can take time off despite its importance to mental and physical wellbeing.
“It’s a broader cultural issue,” Sander said, noting one in five Australians have accrued four or more weeks’ annual leave. “People report not taking annual leave because of worries around job security and missing promotions as well as feeling guilty leaving work to colleagues,” she said.
Younger workers aged 18 to 24 are among those who most urgently need this reform, according to the ACTU, which points to data from the Centre for Future Work – a think tank run by the left-leaning Australia Institute, which has received union funding – showing this cohort performs 6.4 weeks of unpaid overtime a year, compared to 4½ weeks’ extra unpaid work for Australian workers more broadly.
The ACTU also argues Australian workers are owed a real wage increase of about 10 per cent to make up for the productivity improvements since 2000, and that increased paid leave entitlements would help bridge this gap.
“Increasing annual leave by one week would add an extra 2 per cent to employment costs that would be offset by a reduction in employee turnover and time lost to injury and stress,” the ACTU said.
But business lobbies have previously warned that any increase in paid leave would ultimately be borne by customers in the form of higher prices.
Cost to employers
University of Melbourne labour economist Jeff Borland said the cost to employers of an extra week of leave was manageable.
“I used to think an extra week of paid leave was a bit expensive, but it’s only about a 2 per cent increase [in wage costs],” he says. “Effectively, the question is whether workers prefer a 2 per cent wage rise or an extra week of leave.”
Borland also said an extra week’s leave could lead to an improvement in productivity growth – which has lagged over the past decade – because workers would be better rested and fresher.
The unions will push for changes to the National Employment Standards (NES) to bring in the extra week’s annual leave as part of the House of Representatives inquiry into the NES about to get underway. The ACTU formally committed to push for the extra week of leave in 2024.
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.
Millie Muroi is the economics writer at The Sydney Morning Herald and The Age. She was formerly an economics correspondent based in Canberra’s Press Gallery and the banking writer based in Sydney.Connect via X or email.