The push for a fifth week of annual leave is winning support from overworked staff but prompting warnings from HR leaders that SMEs could face serious staffing and productivity challenges if it goes ahead
Australian unions’ campaign to lift minimum annual leave entitlements has drawn mixed reactions from employers, with business leaders warning that small and medium-sized enterprises (SMEs) could face significant workforce planning pressures if the proposal becomes law.
Australian Unions has launched a bid to increase minimum annual leave from four to five weeks for full-time workers, and from five to six weeks for regular shift workers. It would be the first increase in the national minimum standard since the mid‑1970s.
Unions cite unpaid overtime and wage–productivity gap
The push is underpinned by analysis from the Centre for Future Work, which finds Australian workers perform an average of 4.5 weeks of unpaid overtime each year, with 18–24-year-olds doing the most – around 6.4 weeks annually.
Unions argue that an extra week of annual leave would help workers reclaim at least some of that unpaid time and ease mounting work pressures.
ACTU Secretary Sally McManus said Australia’s four-week standard, introduced around 50 years ago, no longer reflects how long or how hard Australians work.
“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. It will mean a better rested and happier workforce,” she said.
McManus also links the claim to the growing gap between productivity and wages. According to the Centre for Future Work, real wages would need to increase by about 10% to catch up with productivity gains since 2000.
The ACTU acknowledges that the change would increase employment costs by about 2% but says that would be offset over time by lower turnover and reduced time lost to injury and stress.
Potential for SME pressure
In conversation with HRD, Athena Chintis, director of people and culture at Cliftons said the rationale behind the unions’ push is understandable but the consequences will differ sharply across the economy.
“I can understand the rationale behind the unions’ push. Australia’s four-week annual leave entitlement hasn’t really changed for decades, and there’s an argument that it should keep pace with other advanced economies,” she said.
“There’s also a growing recognition that many employees contribute additional effort beyond their normal hours throughout the year, so the idea of additional leave resonates with a lot of people.”
Chintis noted that some large retailers like Bunnings and IKEA have already moved to five weeks’ leave. Large organisations often have the scale and workforce flexibility to absorb that kind of change, she said.
The picture is very different, however, for the small and mid-sized businesses that employ the bulk of Australia’s workforce.
“For many SMEs operating with lean teams, an additional week of leave could create real workforce planning pressures, particularly in customer-facing industries where roles need to be covered. It may increase the need for backfilling roles, casual labour, or redistributing work across already stretched teams,” said Chintis.
Question marks over retention benefits
Unions have argued that an extra week’s leave could help employers by reducing turnover, but Chintis is cautious about how much impact the change would have on retention.
“It’s also worth noting the ACTU’s claims that additional leave will bring benefits to an employer through reduced employee turnover,” she said.
“While additional leave may be attractive to employees, it’s unlikely to be the deciding factor in whether employees stay with an organisation. Things like leadership quality, career opportunities and workplace culture tend to have a much bigger impact on retention.”
She noted that, cost considerations aside, some organisations may find the practical impact relatively manageable – especially where operations already slow over summer.
“Many organisations already slow down or shut down over the Christmas and New Year period, so an additional week of leave could provide employees with more flexibility around that quieter period,” she said.
“Ultimately, the real impact will depend on how organisations manage workforce planning and resourcing rather than the entitlement itself.”
Will more leave actually lift productivity and wellbeing?
Unions are pitching the reform as a way to curb burnout and build a more sustainable pace of work, arguing that better-rested employees will be more productive.
Chintis agreed that genuine breaks are crucial for wellbeing, but warns that policy changes alone won’t guarantee productivity gains.
“The bigger issue is whether employees feel able to truly disconnect when they take time off. If people return from leave to an overwhelming backlog of work, the benefits can quickly disappear,” said Chintis.
“For employers, the broader conversation is really about how work is designed in a way that supports both wellbeing and sustainable performance.”
Australia compared to Europe
Part of the unions’ argument is that Australia is lagging many advanced economies on paid leave. Countries including Austria, Germany, France, Spain, Portugal, Denmark, Iceland, Norway and Sweden already guarantee more than four weeks of annual leave.
McManus pointed to these nations as proof that generous leave entitlements can coexist with highly competitive, productive economies.
“It’s time Australia caught up, our annual leave has been frozen at four weeks since the mid-1970s, half a century ago. Most workers weren’t alive when annual leave last went up in Australia,” McManus added.
Next stop: federal inquiry
Unions will press their case through a House of Representatives inquiry into the National Employment Standards (NES), seeking to embed the extra week of leave in the baseline entitlements that apply across the Fair Work system.
If successful, the change would flow through to millions of employees and require businesses of all sizes to rework their leave, staffing and rostering models.
The campaign sets up a broader national discussion about how Australia balances cost pressures on employers with growing evidence of unpaid overtime, stress and burnout among workers.
For now, both unions and employers agree on at least one point: time away from work matters. The contest will be over how much paid time off is sustainable – and who ultimately bears the cost.
