Updated May 2026

Approving annual leave should be simple. In practice, it's one of the trickiest parts of running a team. You're balancing the needs of the business against the needs of your people, often with competing requests for the same dates, and the rules feel ambiguous when you actually try to apply them.

Get it right and your team feels respected and supported. Get it wrong and you've got resentment, claims of favouritism, and people calling in sick at suspiciously convenient times.

This guide covers how to approve annual leave fairly, when you can and can't say no, and what to do when leave requests get complicated.

Key Takeaways

• Annual leave decisions need to balance employee rights with operational needs.
• A clear written policy is your strongest tool for managing requests fairly.
• You can refuse leave, but only with a genuine business reason under the Fair Work Act.
• When sick leave follows a rejected request, focus on documentation and due process, not assumptions.

Why a Clear Annual Leave Policy Matters

Approving annual leave is one of the most common sources of friction in a small business. Employees have the right to take time off to recharge, while employers need to make sure operations continue smoothly.

Without doubt, the HR Staff n’ Stuff team will always recommend having a well-written annual leave policy in place. But of course we would say that… we’re HR consultants and we love a good policy.

An annual leave policy isn’t just a nice-to-have. It’s a business necessity. Without it, confusion, frustration, and tension can creep in quickly.

Here’s why it matters:

Consistency and Fairness

A documented policy means every leave request gets assessed against the same criteria. This dramatically reduces perceptions of favouritism and helps leaders make decisions that hold up under scrutiny. If you've covered how leaders can quietly slip into favouritism at work without realising, leave decisions are one of the most visible places that pattern shows up.

Operational Planning

Businesses need to manage capacity, especially during peak periods like Christmas, EOFY, or seasonal trading peaks. A clear process gives you the framework to plan around demand and avoid being caught short.

Employee Confidence

When employees understand exactly how leave approval works, the whole process becomes less stressful. They know what to expect, when to ask, and what their options are if a request is declined. That clarity builds trust.

Four Approaches to Approving Annual Leave

When multiple requests come in for the same period, leaders need a fair way to decide. Here are the four most common approaches and where each one falls down.

1. First In, Best Dressed

This approach prioritises whoever submits their request first. It’s simple and transparent, but not always practical.

• Employees who may be slower to submit leave requests, perhaps due to personal circumstances or uncertainty about their own plans, may feel disadvantaged.
  
• If all your key staff submit leave requests at the same time and are approved based on this approach, it may leave the business exposed with inadequate staffing levels.
  
• No consideration is given to priority needs. For example, one employee may have a family wedding overseas and has no control over the dates but the employee who jumped in first was simply booking a beach holiday that may be easily adjusted as flights aren’t yet booked and the timing isn’t dictated by external forces such as school holidays and weather conditions. 

A better approach is to use this as a guide, not a rule.

2. Fairness and Rotation

It’s important that managers consider fairness when approving leave. For instance, if one employee always takes leave during the Christmas period, while others miss out year after year, resentment and frustration can build. Implementing a rotating system for high-demand periods, such as public holidays, can help balance this.

3. Business Needs Must Come First

The business needs to operate, and managers have a responsibility to make sure it can. Before approving any request, consider:

Staffing levels. Can the business function effectively without this employee? If multiple people from the same team are on leave at the same time, can service quality and project timelines hold up?

Policy limits. Does your policy cap how many people from one team can be on leave simultaneously? If it does, apply that limit consistently.

Team morale. Approving leave that places too much pressure on the remaining team can be just as damaging as refusing it. Burnout in the people left behind isn't a fair trade.

Peak periods. During busy seasons, you can set blackout periods where leave is restricted. This needs to be clearly outlined in your policy and communicated well in advance.

A Combination Approach (Our Recommendation)

The best practice is to combine all three above. Use first-in, best-dressed as the starting filter, apply fairness and rotation for high-demand periods, and overlay business needs as the final check. Then add one more layer: individual circumstances. A request driven by a family event or a once-in-a-lifetime trip deserves more weight than a flexible holiday that could easily move.

The decision still rests with you, but a combination approach gives you a defensible framework that holds up across the team.

How to Refuse Annual Leave the Right Way

Approving annual leave often means saying yes, but sometimes it means saying no. Saying no is part of leadership. But how you communicate the refusal matters as much as the decision itself.

Under the Fair Work Act, an employer can refuse a leave request, but only on reasonable grounds. The Fair Work Commission has been clear that the refusal must have a genuine business reason. Acceptable reasons include:

• Other employees already on leave for the same period, leaving the business short staffed
• Operational requirements during the leave period (a finance manager requesting EOFY leave is the classic example)
• The leave would cause genuine business detriment
• The employee didn't give reasonable notice
• The employee didn't follow the documented policy

General inconvenience isn't enough. "We're busy" isn't enough. The Fair Work Commission has overturned plenty of refusals that didn't meet the bar, sometimes with significant consequences for the employer.

For a deeper look at the legal grounds for refusing leave and recent Fair Work Commission decisions, see our guide on when an employer can refuse an annual leave request.

When you do need to refuse, be clear and upfront. Explain the business reasons. If your team member understands why, they're far more likely to accept the outcome. And if you've got a written policy, point to it. You're not making the decision up on the spot. You're applying a consistent process.

For more detail on the National Employment Standards and your obligations as an employer, the Fair Work Ombudsman's guidance on taking annual leave is the authoritative source.

When Sick Leave Follows a Rejected Leave Request

One of the trickiest situations: you decline an employee's leave request, and a few days later they call in sick for the exact dates they originally asked for.

The temptation is to assume the worst. Don't. Employees are entitled to personal leave when they're genuinely unwell, and you must respect that. But you also can't ignore patterns of potential misuse.

This is where a well-written policy does the heavy lifting. If your policy clearly outlines your right to request evidence (including medical certificates), you're in a much stronger position to manage the situation properly. For more on what employees are actually entitled to under personal leave, see our personal leave guide.

What to Do

Before you jump to conclusions, follow due process. If you start to see a pattern, for example repeated sick leave after declined leave requests or around long weekends, it’s reasonable to look into it further. Patterns matter. Document them.

When it comes to suspected misuse, don’t rush into disciplinary action without evidence. That’s where things can unravel quickly.

Instead, focus on a couple of key steps:

Document everything. Keep clear records of both approved and declined leave requests. That paper trail becomes critical if you need to investigate.

Request medical evidence. Employers can ask for evidence for as little as one day off. If an employee doesn't provide it when requested, they may not be entitled to payment for that leave. A medical certificate still needs to satisfy a reasonable person, and if the timing raises concerns, it's reasonable to seek further clarification.

Look for patterns. A one-off is rarely worth pursuing. Repeated sick leave following declined requests, or around long weekends, is a pattern worth examining.

Stay procedurally fair. Don't rush into disciplinary action without evidence. Procedural fairness protects both the employee and the business.

Sometimes there's a legitimate reason. The timing might be unfortunate but not dishonest. Stick to your process, and if you're not confident navigating it, get advice before you act.

It’s Not About Being Liked

Leadership isn't a popularity contest. Sometimes approving leave means saying yes. Sometimes it means saying no. The hard part is being consistent regardless of who's asking.

Take this example. You approved Jane's leave six months ago. Flights are booked. Accommodation is paid. Now George wants the same dates for a surf trip. That's a no, and it's a fair no.

But if George needs those dates for a family wedding overseas, you're dealing with a different situation. Flexibility, planning, and problem-solving come into play. You might:

• Bring some of his work forward so it's done before he leaves
• Upskill another team member to cover key tasks
• Arrange short-term cover through a contractor

The decision isn't always black and white. But consistency and communication will always guide you to the right outcome.

Best Practice for Approving Leave Without the Drama

The best way to avoid conflicts over leave requests and prevent misuse of sick leave is by implementing proactive strategies. Here are a few tips:

Set Expectations Early

Make sure everyone understands how leave approval works from their first day. Build it into onboarding. Reference it in the employee handbook. Don't let people guess.

Encourage Forward Planning

The earlier requests come in, the easier they are to manage. A team that's planning leave six months ahead is much easier to support than one that's asking two weeks out.

Be Flexible Where Possible

If a request doesn't impact the business, say yes. Easy approvals build trust, and trust makes the harder conversations easier when they come.

Rotate High-Demand Periods

Don't let the same people lock in the same dates every year. Even informal rotation goes a long way.

Keep Communication Open

A shared leave calendar can prevent clashes before they happen.

Be Consistent

Nothing damages trust faster than inconsistency. The moment your team thinks leave decisions are based on who you like rather than clear criteria, you've got a favouritism problem on your hands.

The Bottom Line

Managing annual leave is a balancing act, but it doesn't have to be a source of stress. Set clear policies. Be fair. Stay flexible where you can. Apply the same standards across the team, and explain the reasoning when you can't approve a request.

If you suspect sick leave misuse, stick to a clear process so you protect the business without overstepping on employee rights. And if a situation feels too complicated to navigate alone, get advice early rather than after things have escalated.

Need help reviewing your annual leave policy or managing a tricky leave situation? Get in touch with HR Staff n' Stuff. We help Australian businesses build policies and processes that actually work.

FAQs About Approving Annual Leave