Annual leave in advance means an employee takes paid annual leave before they've accrued it. It's allowed when their award or registered agreement says so and the employer agrees in writing, and Fair Work publishes a free "Agreement to take annual leave in advance" template for the paperwork.
It comes up all the time with new starters. Someone joins in October, has a family wedding in December, and has two days in the bank. This guide covers when leave in advance is allowed, what the written agreement must say, what happens if they leave early, and how to keep the record. It's written for owners, managers and payroll officers.
This is general information, not legal advice. Facts are as at November 2026. Check your award or agreement, and the Fair Work Ombudsman's annual leave pages, before you rely on them.
When can an employee take annual leave in advance?
Only when two things are true:
- Their award or registered agreement allows it. Since 2016, most modern awards include a model "annual leave in advance" clause. Enterprise agreements may or may not. Check yours on the Fair Work awards list or the Fair Work Commission's agreements search.
- You agree, in writing. Leave in advance isn't an entitlement. An employee can ask, but it only happens if you say yes.
For award and agreement-free employees, the Fair Work Act lets you agree on when annual leave is taken. Fair Work's template is written for award and agreement-covered employees, so get advice before you agree to leave in advance for anyone else.
What the agreement must include
Fair Work says the agreement must:
- be signed by both the employee and the employer
- say how much annual leave is being taken in advance (in hours or days)
- say the day the leave will start
A verbal "yeah, no worries" in the lunchroom doesn't count. Neither does a general clause in the employment contract. You need a signed agreement for each period of leave taken in advance.
What's on the Fair Work template
The Agreement to take annual leave in advance template is a one-page letter, available in Word and PDF from Fair Work's templates page. It has:
| Section | What it asks for |
|---|---|
| Letter details | Your letterhead, the date, the employee's name and address |
| Parties | Name of employee, name of employer |
| The agreement | That the employee will take paid annual leave before accruing it |
| Amount and start | How many hours or days, and the date the leave starts |
| Deduction on termination | What happens if employment ends before the leave is accrued |
| Signatures | Employee, employer representative (with name), each with the date |
| Under 18s | A parent or guardian signature block, if the employee is under 18 |
The template has purple guidance text that you delete before sending, and red text you replace with your details.
What if the employee leaves before they've accrued it?
This is the risk for the employer. The employee's leave balance goes negative when they take leave in advance, and normal accrual brings it back to zero over time.
If employment ends before that happens, the model award clause lets you deduct from the money owed to them on termination an amount equal to what you paid for the leave they hadn't yet accrued. The Fair Work template includes this wording, and the employee signs it.
Two things to get right:
- The deduction has to be in the signed agreement. Without it, you're on shakier ground taking money from final pay.
- Only deduct what's unaccrued. Work out how much leave they'd accrued by their last day and deduct only the difference.
What records you have to keep
Fair Work's record-keeping rules say that if you agree to an employee taking annual leave in advance, you must keep a copy of the agreement, showing the amount of leave and the date it starts. Your payroll records also need the leave taken and the employee's balance.
All employee records must be kept for 7 years, be legible, in English, and readily available to a Fair Work Inspector.
Common mistakes
- No written agreement. The leave goes through payroll on a manager's say-so, and there's nothing to point to if they resign a month later.
- Missing start date or amount. "Some leave over Christmas" isn't enough. The agreement must state both.
- Only one signature. The employee signs and it sits in a manager's inbox, never countersigned.
- Under 18s without a parent or guardian signature. Common with junior staff in hospitality and retail.
- Lost paperwork. The signed copy is in someone's email, not on the employee's file.
How to say yes (or no) fairly
Before you agree, check:
- Does the award or agreement allow it?
- How much leave will they owe? Weigh up how long it will take to accrue and how likely they are to stay.
- Is it a one-off? Agreeing to several advances in a row can leave a big negative balance.
If you say no, explain why and offer other options, like unpaid leave or waiting until they've accrued enough.
How Canyou handles this
Canyou is employee onboarding software for Australian businesses. The same e-sign and workflows you use for new starter contracts work for everyday agreements like this one. You set up Fair Work's template once, then employees request it whenever they need:
- Employees ask from their phone. "Annual leave in advance" is a self-service workflow they start from their own dashboard.
- Both parties sign, in order. The employee fills in the amount and start date and signs. You see their answers, then countersign with an electronic signature.
- Everyone gets a copy. Both signers are emailed the signed PDF, and completion notifications tell your payroll officer straight away.
- A record you can find. The signed agreement stays against the employee, with a certificate of completion.
Our help centre has the step-by-step setup: how to set up annual leave in advance agreements in Canyou. Canyou doesn't track leave balances, so you still record the leave in your payroll software, such as Xero.
For regular leave requests, see our guide to the Fair Work leave application form.
Try for free (no credit card required), or Book a demo.
Sources (checked 3 November 2026): Fair Work Ombudsman, Agreement to take annual leave in advance template (templates page: templates); Taking annual leave; Record-keeping; Fair Work Commission, 4 yearly review of modern awards: annual leave.
