Annual Leave Loading
Annual leave loading is an extra payment that some employees receive either upon the commencement or during a period of paid annual leave. The loading amount (if any) varies depending upon the industrial instrument which covers their employment. Not every employee is entitled to annual leave loading.
Employee Leave Loading Entitlements
The National Employment Standards (NES) – a set of standards that form part of the Fair Work Act 2009 and apply to all employees covered by the national workplace relations system – prescribe a minimum of four weeks paid annual leave (also sometimes known as holiday pay) per year for full-time and part-time employees regardless of any award, agreement or contract.
Leave loading, holiday loading or annual leave loading, is an extra payment employees may be entitled to on top of their usual pay whilst on annual leave. Under the NES a full-time employee is entitled to four weeks annual leave per year based on their ordinary hours of work up to 38 hours a week. Annual leave loading may be payable on accrued annual leave when it is taken by the employee.
Below are some of your questions on when to pay leave loading answered.
Do Employees Get Annual Leave Loading On Annual Leave?
Not all employees get annual leave loading when they take holidays. The entitlement to annual leave loading is derived from the award or enterprise agreement that applies to the employee. If they are not covered by an award or registered agreement, then an employment contract with the employer may provide for annual leave loading.
BrightHR can help you keep track of your employees’ leave entitlements by monitoring absences and shifts schedules, as well as working hours as they clock in and out with Blip. You can generate timesheet reports and store wage and time records securely in the cloud.
Does Leave Loading Apply To Long Service Leave?
No leave loading is payable on long service leave. Leave loading is only payable on annual leave, and then only where an award, agreement or contract provides for it.
Does Leave Loading Apply to Sick Leave?
Leave loading is not payable on any type of leave other than annual leave unless an award, agreement or contract says otherwise.
Is Annual Leave Loading Payable On Termination?
If an employee is entitled to annual leave loading during their employment, then it also has to be paid out when employment ends.
However, some employees may receive an annual salary or an all-inclusive hourly rate that incorporates annual leave loading, in which case it does not need to be paid separately as it forms part of their remuneration. Whether annual leave loading is included in the salary amount or forms part of an hourly rate will usually be stated in the employment contract.
Annual Leave Loading Payment
An employee must be paid at least their base rate of pay for their “ordinary” hours – i.e. hours they ordinarily would have worked during a period of annual leave up to 38 hours a week, unless their award, registered agreement or contract provides a greater entitlement. The base rate of pay generally does not include penalties, allowances, loadings or bonuses.
The applicable award or registered agreement may provide for a different method of payment for annual leave, and will determine whether employees may be entitled to be paid annual leave loading on top of their base pay rate when they take annual leave and how it should be applied.
Some awards stipulate that employees get paid the higher of the following, calculated over the whole period of leave that is taken:
a 17.5% loading on the employee’s base rate of pay for the job they do under the award classification for the ordinary hours they would have worked if they weren’t on leave; or
the employee’s normal (over-award) rate of pay for the hours they would have worked if they weren’t on leave plus 17.5% loading; or
the penalty rates the employee normally gets if they would have worked (plus shift loading if the employee is a shiftworker).
Get Workplace Advice Now
Call our team to receive free initial advice on workplace relations.
Frequently Asked Questions
Why Is Annual Leave Loading Paid?
Annual Leave Loading is a means of encouraging employees to take leave, as they are protected from from any financial loss associated with taking holidays and being away from their normal work environment.
Do Employers Have To Pay Leave Loading?
Yes. The source of an entitlement to leave loading is usually the applicable Award or agreement, or the contract of employment. If the employee is entitled to annual leave loading, it is compulsory for the employer to provide it, though it may already be accounted for if the employee has an annual salary or an all-inclusive hourly rate. Usually the employment contract will indicate what is included in the employee’s normal rate of pay.
Is There Leave Loading On Unused Annual Leave?
Unused annual leave is included in an employee’s final pay at the end of their employment. If the employee was entitled to payment of annual leave loading as a result of their award or enterprise agreement or contract then they will be entitled to payment of the applicable annual leave loading over the remaining leave.
If the employee is cashing out their annual leave, then the payment for cashed out annual leave has to be the same as what the employee would have been paid if they took the leave, so if leave loading applies it will also need to be paid with the annual leave.
What Is The Leave Entitlement And Loading For Annual Leave?
The minimum annual leave entitlement for employees within the national workplace relations system comes from the National Employment Standards (NES) contained in the Fair Work Act 2009.
A full-time employee is entitled to four weeks annual leave per year based on their ordinary hours of work up to 38 hours a week, and part-time employees are entitled to pro-rata paid leave according to the number of ordinary hours they work per week. Shift workers are entitled to an additional week. Please be mindful that Awards and Enterprise Agreements may provide for additional annual leave entitlements.
The amount of annual leave loading is dependent on the industry within which you are working and the specific employee’s arrangements. Most modern awards provide that annual leave loading is the higher of 17.5% compared to the weekend penalty rate the employee would normally get if leave is taken on a weekend, including any shift loading if the employee is a shift worker.
Is There Leave Loading On Personal Leave?
No, there is no leave loading when employees take personal leave.
How Do You Work Out Annual Leave Loading?
This will depend upon the industrial instrument (if any) which covers the relevant employee. Generally, the calculation would be the product of their base rate of pay, multiplied by the amount of shift loading the specific employee is entitled to, multiplied by however many weeks of annual leave per year the employee is entitled to.
We can help you understand and calculate annual leave loading if it applies. Call us on 1300 651 415 for free initial advice.
