Three Threats to Paid Holidays in Australia

Holidays are important. We dream about them. We plan them. We take them on our own, with family, and with friends. Paid holidays are among the greatest social achievements of workers, reformers and the labour movement. Paid annual leave democratises the holiday and allows millions of Australians to take a break with a sense of security.

But a recent Australia Institute Centre for Future Work report highlights three threats to place of paid holidays in Australian life.

As part of the Australia Institute’s annual Go Home on Time Day, we asked nearly 1500 Australians about their access to, and utilisation of, paid annual leave. The results confirm that the paid holiday in Australia is under serious challenge.

Firstly, a shrinking share of Australian workers is entitled to paid annual leave. Our survey indicates that almost one-third of employed workers – 32 percent – have no entitlement to paid holiday.

This alarming result reflects the growing prevalence of precarious work: casual jobs, temporary work, irregular part-time hours, and marginal self-employment over recent decades.

Our research also shows a strong correlation between access to paid annual leave and income levels. Some 63% of those on incomes under $40,000 received no paid holiday leave entitlements in 2015, compared to only 20% of those earning over $150,000 (see Figure 1).

Figure 1. Paid Leave Entitlements by Income Category.

(Source: Australia Institute, 2016)

Labour force data from the Australian Bureau of Statistics corroborate this erosion of leave entitlements. Of a 12.5 million-strong national labour force in 2015, less than half worked in full-time paid positions with leave entitlements.

The rest are workers in casual positions, independent contractors, part-timers, and self-employed (most of whom have no other employees). For these workers, regular paid holidays may be out of reach.

A second threat to the holiday comes from the fact that a large share of Australian workers with access to paid annual leave don’t use all of their entitlement. Our survey indicates that about half of Australian workers with leave entitlements, leave some of it on the table.

They report a range of motivations for doing so – including having too much work, fearing it would undermine their job security, and hoping they could use it later.

Among those who do not utilise all their paid holiday leave, an average of over 10 days leave was not taken. And across all employed Australians, this works out to an average of 4 days of unutilised paid annual leave for 2015.

Extrapolated to the national labour market, that suggests almost 10 million weeks of unused holiday time. At average weekly wage rates, that’s $11.1 billion worth of holidays not taken.

Declining access to – and use of – paid annual leave represents a cultural shift from seeing the paid holiday as an essential right of employment, to treating it as an optional extra.

One dangerous indication of this “use it or lose it” logic is the recent decision by the Fair Work Commission to allow workers and employers to cash out up to 2 weeks of paid annual leave per worker per year.

This provision has now been applied to most modern awards, and will increasingly infiltrate other contracts (both collective and individual).

If more and more workers take that option (understandably, given the challenge of balancing family budgets in an economy with stagnant wages and soaring housing costs), then those two weeks pay will ultimately get folded into norms of compensation, further undermining the right to paid annual leave.

Ironically, the failure to defend and utilise annual leave reinforces the underlying labour market weakness that helps explain the decline of the holiday. If employers can recruit more workers willing to forego annual leave, and/or convert it into cash, then the pressure on them to hire full-time permanent workers dissipates accordingly.

In contrast, if all those 10 million weeks unutilised leave were indeed taken, and employment increased accordingly (on the assumption that employers would need additional staff to fill in while others were utilising their leave), the result would be 185,000 new jobs – enough to reduce Australia’s official unemployment by over one-quarter.

Of course, the relationship between paid leave and new hiring is not as direct as that in practice, but there is no denying that the greater utilisation of holiday leave (and other paid time off) would enhance the pressure on Australian employers to hire new staff, reinvigorating the economy’s lacklustre record of job-creation.

There’s abundant evidence of the negative effects of overwork on mental health, physical health, family stability, relationships, productivity, and more. Continued erosion of the annual holiday will exacerbate that damage.

Workers and their unions fought hard over the past century to quarantine a little bit of their time from the demands of paid work, and the paid holiday is an important outcome of those efforts.

But progress in this area has stalled – and to an extent been reversed – in recent years. If we want to defend and extend access to paid holidays in Australia we need to fight for it.

The recommendations below are a contributing to achieving that end:

1. Developing public education campaigns reminding Australians (including students) of the history of the struggle for shorter working hours and paid annual leave in Australia.
2. Giving workers the right to use excess paid annual leave balances at a time of their choosing.
3. Removing the option to cash out paid annual leave.
4. Introducing ‘gradual deeming’ and ‘portable leave banks’ that allows casual, and other insecure workers, to accumulate paid annual leave.
5. Increasing the statutory minimum paid annual leave from 4 weeks to 5 weeks in keeping with the benefits of ongoing productivity growth and standards in several other wealthy countries.

Co-authored with Jim Stanford