Annual Leave Loading.

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Annual Leave Loading – a Quick Definition

Leave loading is an extra payment that some employees receive either upon the commencement or during a period of 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. Find out who gets annual leave loading below.

What Is Annual Leave Loading?

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 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.

Annual Leave Loading Eligibility

Eligibility for annual leave loading and the loading that applies 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.

Employees under many Modern Awards  or registered agreements are entitled to a loading when the employee takes paid annual leave. If the employee doesn’t fall under a relevant Award or registered agreement they will be paid at their base pay rate, or the rate at which they are usually paid.

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 hours they work. Shift workers may be entitled to more. Whether or not an employee is a shiftworker will depend on the definition in the relevant award or registered agreement that applies to that employee.

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, as untaken annual leave carries over from year to year.

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Annual Leave Loading on Termination.

In the case of an employee’s termination, that employee must be paid out their remaining unused annual leave, and annual leave loading on top if they are entitled to it. 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. 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 is paid out even when an award, registered agreement or employment contract says that it’s not as the 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.

Annual Leave Loading Payment

An employee must be paid at least their base rate of pay for the 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 weekend penalty rates the employee normally gets if they would have worked (plus shift loading if the employee is a shiftworker).

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 contact  Employsure for free initial advice on 1300 207 182.

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Frequently Asked Questions

  • How Do You Calculate Annual Leave Loading?

    This will depend upon the industrial instrument (if any) which covers the relevant employee.

    We can help you understand and calculate annual leave loading if it applies. Call us on 1300 207 182 for free initial advice.

  • Is Annual Leave Loading Compulsory?

    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, 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.

  • How Much Is Annual Leave Loading?

    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.

  • Who Gets Annual Leave Loading?

    An employee covered by an award or registered agreement or contract that provides for annual leave loading.

  • What Does Pro Rata Leave Mean?

    Annual leave accumulates on the ordinary hours that an employee normally works, up to 38 hours a week. Part-time employees get 4 weeks annual leave on a pro-rata basis. That means that a part-time employee who works 20 hours per week for a year will accumulate 80 hours of annual leave, which equates to 4 weeks work.

  • Do Part-Time Employees Get Annual Leave Loading?

    Yes. If the part-time employee’s applicable award, enterprise agreement or an employment contract allows for annual leave loading, then it should be paid for those days that the employee takes annual leave.

  • When Does Annual Leave Loading Get Paid?

    Annual leave loading is generally paid at the same time the employee is paid for their annual leave. An employer is usually only required to make payments to employees on annual leave in accordance with their normal pay cycle. However, an award or registered agreement may require payment for annual leave and the corresponding annual leave loading to be made prior to the leave being taken.

  • Is Annual Leave Loading Included In Annual Leave Payouts?

    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.

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