Leave loading, holiday loading or annual leave loading, is an extra payment employees may be entitled to on top of their usual leave pay. Eligibility is defined by the relevant National Employment Standards (NES) award, enterprise agreement or unique contract with the employer. The amount of annual leave loading is also derived from the NES, though is usually 17.5% extra.
While you may have a reasonable understanding of annual leave for your employees and even other forms of leave, what about annual leave loading? It can be a tricky area to understand, so have a read of the points outlined below to make sure that you manage annual leave loading in your business correctly.
As you may already know, annual leave (also sometimes known as holiday pay) allows part-time or full-time employees to be paid while they are taking time off work. The level of annual leave which each employee is entitled to, is derived from the National Employment Standards (NES) – a set of standards which every business organisation in Australia must adhere to. So to understand how much annual leave each employee is entitled to, it is important to look up their specific working arrangement.
In some cases, employees under the relevant Award or agreement may be entitled to additional leave loading when the employee takes their annual leave (which is usually around 17.5% extra on their typical payment). If the employee doesn’t fall under one of these relevant Awards or agreements, they will be paid at their base pay rate, or the rate at which they are usually paid.
The type of leave loading mentioned above is quite a common feature in many Modern Awards. But if you are unsure of your employees’ entitlements to annual leave loading once they have initiated annual leave, you can check with their applicable Award or agreement. The entitlement will correspond with what is found there.
It is also important to remember that unless it is otherwise provided by an industrial instrument, annual leave loading is payable on all accrued annual leave when it is taken by the employee. Meaning that it is not restricted to just the current year’s accrual.
In the case of an employee’s termination, that employee will be entitled to be paid out for both annual leave and annual leave loading if they are entitled. This entitlement is based on a provision of annual leave on termination within the Fair Work Act 2009. The provision states that if an employee is terminated and they have a period of untaken annual leave, they must be paid out what they would have been paid had they taken that period of annual leave.
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, then yes, it is compulsory for the employer to provide it.
The amount of annual leave loading is dependent on the industry within which you are working and the specific employee’s arrangements. To work out exactly how much annual leave an employee is entitled to or if an employee is entitled to leave loading, please visit our Annual Leave Guide, check the relevant Award or speak with an Employsure specialist today on 1300 651 415.