Annual leave - Must it be paid? Must it be taken ? Or is it forfeited?
Questions, questions, questions.
This question of payment for annual leave is raised time and time again. The Basic Conditions of Employment Act - section 20 - lays down certain conditions applicable to annual leave. One of the conditions is that the employer may not pay an employee instead of granting paid annual leave except on termination of employment, and in terms of section 40 (b) & (c).
Those sections state that on termination of employment, an employer must pay an employee remuneration calculated in accordance with section 21 (1) for any period of annual leave due in terms of section 20 (2) that the employee has not taken.
Section 20 (2) stipulates the amounts of annual leave that an employee is entitled to accrue in every annual leave cycle – which, as we know, is a period of 12 months commencing from the first day of employment, or the completion of the prior leave cycle. That seems clear enough - or is it?
Based on what is stated in the BCEA, my view is that upon termination of service, the employee is entitled to be paid out for any period of annual leave that he has accrued in terms of section 20 (2).
At any rate, that is what the act seems to imply.
This would imply that an employee who has resigned, after say 5 years service, and he has a few days accrued from year 1, perhaps a few days left over from year 2, perhaps a few days left over from year 3, and 2 weeks left over from year 4, would be entitled to be paid out for all of that leave. The act states that he is entitled to be paid out for any period of leave that he has accrued in terms of section 20 (2).
That, at least, is what I consider to be a logical interpretation. In Jooste v Kohler Packaging Ltd  12 BLLR 1251 (LC) there is a different viewpoint. When the applicant in this matter the resigned his employment, he and accumulated 141 days leave. The employer paid him for only 50 days.
The question addressed by the Court was whether the BCEA obliges an employer to pay an employee remuneration in lieu of leave accrued during years preceding the leave cycle immediately preceding the termination of employment, noting also that the parties may not contract out of the provisions of the BCEA.
However, it was stated that parties are free to regulate, by agreement, any annual leave agreed to in excess of the minimum stipulations of the BCEA, and in this event it was stipulated in the applicant's employment contract that he would forfeit any leave in excess of 50 days upon termination of the contract of employment.
The Court then pointed out that there is a difference between the right to accumulate leave, and the right to be paid in lieu of taking it. The Court pointed out that the leave in question was leave that had been accumulated over the years, and that at any time during those years the applicant could have insisted on his rights to take the leave on full pay.
The applicant maintained that he should be paid out for the accumulated leave, because the respondent would have had to pay him had he taken the paid leave - therefore the respondent was not losing anything, and is not being financially burdened by paying him out for the leave.
The applicant argued further that he had been prevented from taking the leave at the request of the respondent, who stated that he could not allow him to proceed on annual leave for operational reasons. The applicant contended therefore that because he was unable to take the leave, the respondent’s refusal to now pay him out for the leave on resignation was an unfair labour practice.
The respondent’s representative argued that “section 40 should not be construed as relating only to the leave cycle immediately preceding the cycle during which employment is terminated, and that the 1997 BCEA provides nowhere for forfeiture of leave accrued, but not taken, and that since there was a period of 91 days of leave due to the applicant in terms of section 20(2), which he had not taken at the date of his resignation, he was entitled in terms of section 40 to payment in respect thereof.”
This, of course, is quite true - the BCEA does not make any provision for the forfeiture of annual leave which has been accrued but not taken. Therefore, it would imply that no portion of annual leave can be forfeited - but the BCEA also makes provision that the provisions relating to annual leave apply only to that amount of leave which is stipulated in the BCEA - it does not apply to annual leave in excess of the minimum amounts provided for in the act.
The view of the Court was that it is not the intention of the act to allow employees to accrue annual leave and then be paid for it. Such a situation would circumvent the purpose of the act.
“The very purpose of the BCEA is to ensure that an employee takes annual leave. An employer may not refuse him that entitlement. The BCEA contemplates that leave will be taken so that the problem of accumulation does not arise. To permit payment upon termination for statutory leave accumulated from prior cycles would be to allow both the employer and the employee to circumvent the Act, and section 20(2) and section 12(1) of the respective Acts would serve no purpose.”
The following was also referred to:
“In Newton v Wilburg Ellis Co (Pty) Ltd [ Cape of Good Hope Provincial Division of the High Court of South Africa] case number 9563/94 dated 25 September 1996, Judge Kuhn concluded as follows:
“The purpose of the Act is to regulate the conditions of employment of certain employees. Amongst others, it makes provision for annual leave in a leave cycle of 12 consecutive months service. The employer is obliged to grant leave to the employee after each leave cycle of 12 months. He is not entitled to pay him his salary or any other amount in lieu of leave (section 12(9)). It is in my view clearly the intention of the legislature that an employer must grant leave to an employee for each completed leave cycle and that leave must be taken by the employee. He is not entitled to accumulate leave and receive remuneration in lieu of leave. Section 12(4) must be construed in that context. It means, in my view that an employee whose employment is terminated, is only entitled to remuneration for the leave that has accrued to him in the leave cycle immediately prior to the termination of his service and pro rata for the period for which he was employed in the leave cycle in which his services are terminated” (at p 10).
There are other judgements which hold a different view. However, circumstances in those other judgements may be different from the circumstances in the one reported above. For more information contact Derek Jackson on
Employers are advised in every instance, to take proper, detailed legal advice from your own labour law practitioner before acting in terms of any court judgement. This is certainly not to imply that Court judgements may be inaccurate or suspect in any way – the reason for this advice is simply because every case is unique, and circumstances very from case to case.