Annual Leave – use it or lose it

Jan 23, 2025

Articles

Introduction

Section 20 of the Basic Conditions of Employment Act 75 of 1997 (BCEA) prescribes that an employer must grant an employee at least:-

  1. 21 consecutive days’ annual leave on full remuneration in respect of each annual leave cycle, which is the period of 12 months’ employment with the same employer immediately following:
    1. an employee’s commencement of employment; or
    2. the completion of that employee’s prior leave cycle.
  2. By agreement, one day of annual leave on full remuneration for every 17 days on which the employee worked or was entitled to be paid;
  3. By agreement, one hour of annual leave on full remuneration for every 17 hours on which the employee worked or was entitled to be paid.

Section 20 also prescribes that an employer must grant annual leave not later than six months after the end of the annual leave cycle. Finally, the aforementioned section stipulates that an employer may not pay an employee instead of granting paid leave, except in the case of termination of employment, when an employee shall be paid for any annual leave not taken.

The above being the default position, a new judgment from the labour court in the matter between Hartley v SMD Trading Group CC1 stresses that taking time off every year is one of an employee’s fundamental rights. A less favourable deviation from the default position by the employer shall amount to a breach of the law, there’s an even more serious factor for employees: leave not taken within six months of the relevant leave cycle will be lost.

Background

Mr Hartley, a top-rated car salesperson was headhunted by the Land Rover franchise in Umhlanga to take up the role of dealer principle.

When Hartley was approached by the principal member, Mr Duminy, of the franchise holder, SMD Trading Group, to join the Land Rover dealership, he had one major condition: the salary and conditions of services he had enjoyed at his previous job should be unchanged. Hartley’s conditions were met; thus, he began what would be just over five years work at SMD.

During 2018 SMD found itself in a tight spot financially, and towards the end of the same year another company expressed interest in taking it over. The proposition of this take-over seemed to be the answer to their financial problems, and accordingly the top brass at SMD met to discuss the possible acquisition.

To make the sale more attractive, they considered a drastic reduction in its expenses which would entail a cut in salaries. Hartley’s salary was slashed by 67%. Stunned by the extent of his salary cut, he resigned at the end of 2019 and left the business at the end of April that year. Unable to make progress with several claims against SMD, Hartley turned to the Labour Court during 2021.

Labour Court

One of the claims Hartley made was that the company was not paying him for the leave he had accumulated at the time he left. Hartley contended that he was entitled to payment of 73 days’ annual leave that he had accumulated. He submitted that this figure was based on the 20 days’ a year annual leave to which he was entitled during the six years he worked for SMD, less the actual leave he had taken during those years.

Hartley’s claim was complex since in 2016, Mr Goolam, who was responsible for the administration of leave, had sent an email to all SMD managers about leave accumulation. Goolam wrote that no employee could accumulate more than 15 days’ leave in a leave cycle, and that any leave over and above these
15 days would be automatically forfeited.

Hartley conceded that he was aware of the email however he argued that it did not apply to him since at the time of the email, he was a shareholder of SMD and not an ordinary employee.

The Judge found that in the absence of a contract of employment illustrating otherwise, the default position as set out in the BCEA would apply. Hartley’s annual leave entitlement would have to be as laid down in this law, namely 21 consecutive days of annual leave – or 15 working days – for each annual leave cycle, to be taken not later than six months after the end of the annual leave cycle.

Quoting further from the law, the Judge said that “an employer was not allowed to pay employees instead of giving them leave.” Hartley’s testimony was that when he started his employment with SMD, he negotiated for 20 working days’ leave a year but there was no evidence that he would be allowed to accumulate unlimited days from previous cycles. The Judge found to the contrary that there was clear evidence that employees, including Hartley, had been informed that they could not accumulate leave.

Key Findings

The Judge stated that the whole purpose of the BCEA was to ensure that an employee takes annual leave and that an employer may not refuse employees their leave entitlement. Allowing leave to accumulate would let both employer and employee circumvent the law.

Employees must know that they have to take their leave, or else they will lose it, that way they will be motivated to enforce their rights, take their leave, and the objectives of the BCEA shall be achieved.

Guaranteed annual leave was never intended to act as a kind of piggybank available for employees to use in generating a lucrative cash pay-out when they quit the job. The essence of leave is to ensure that employees had guaranteed rest and recouperation and that in turn was intended to enhance workplace safety and efficiency.

The court this rejected Hartley’s claim to 73 days of accumulated leave. As per the SMD notice, no leave could be accumulated beyond that due in each leave cycle, and Hartley was thus entitled to pay for 15 instead of 73 days.

Conclusion

The judgement is a sobering one which reiterates that every employee, from the highest management level downwards, must take their leave as provided for by the law. If they don’t, it will be lost.

by Ross Simon
© Maserumule Corporate Employment Law – January 2025

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This information is published for general information purposes and is not intended to constitute legal advice and should not be construed as such. Specialist legal advice should always be sought in relation to any particular situation. Maserumule will accept no responsibility for any actions taken or not taken on the basis of this publication. Consent must be obtained from Maserumule before the information provided herein is reproduced in any way. No person shall have any claim of any nature whatsoever arising out of, or in connection with, the information provided herein against Maserumule and/or any of its personnel.

Annual Leave – use it or lose it
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