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Ask Ed: How do I know if we should be paying our staff 17.5% annual leave loading?

Ask EdAugust 3, 2015

Ask Ed: How do I know if we should be paying our staff 17.5% annual leave loading?

I am really pleased we are addressing this question as this directly applies to employers across all industries, and determining the outcome can sometimes be confusing.

When thinking about annual leave employers generally think that the usual rate of pay is paid while employees are on holiday. However, if annual leave loading is payable this means an additional 17.5% may need to be paid on top of the standard rate.

Leave loading was designed to protect employees from any loss associated with taking holidays and being away from their normal work environment. For example, additions such as commission, penalties or loadings, or any other additions are not applicable whilst away.

To determine if you should be paying leave loading you will need to check your industry’s Modern Award where it will detail terms regarding leave loading. If you function under an Enterprise Agreement (EA) or any other registered agreement, you may also have set out leave loading entitlements. It is therefore, very important that individual employers make sure they are aware of agreements in place and entitlements awarded.

Bearing this in mind, some Awards enforce leave loading even in circumstances where no allowances, penalties or loadings are usually payable. For example, administration staff engaged under the Clerks – Private Sector Award 2010, that regularly work 9.00am to 5.00pm, Monday to Friday (no overtime) are still entitled to leave loading! So be aware…

As a general rule, if your employees are Award covered and you pay Award rates, you should most likely be paying leave loading. However, if you pay above Award rates and clearly state in your contract of employment that the rate is inclusive of leave loading, then you will not be liable to pay it.

It is important to remember that if you pay above Award rate, this payment must be sufficient to cover the leave loading due. If it is not, your business can be at risk of an entitlements claim and/or significant penalties issued by the Fair Work Ombudsman.

If you need guidance determining if you should be paying leave loading or other allowances and entitlements, please call Employsure today on 1300 651 415.

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