As an employer, you have a number of obligations to your employees. This includes ensuring they receive their leave entitlements and providing them with a safe workplace

In some cases, employers may have an obligation to provide leave loading. Leave loading is an additional payment employers make to their employees when they go on annual leave. 

Let’s take a look at what leave loading is and how you can meet your employer obligations in Australia. 

What Is Leave Loading In Australia?

Leave loading in Australia refers to the additional payment employees receive when they go on annual leave. It is usually paid along with the normal pay during the regular pay cycle. 

The typical rate for leave loading is 17.5% of an employee’s regular pay. This is not a uniform number and it can vary based on the employee. 

Leave loading was created as a way to reimburse employees for expenses that resulted from being on holidays. Being on leave means that employees cannot accumulate pay for working outside of their usual hours, such as overtime. Leave loading was created to compensate for this. 

What Is Annual Leave?

Annual leave is the paid, yearly holiday employees are entitled to take. In Australia, full time employees get 4 weeks of paid annual leave. 

Annual leave is a legally protected right set by the National Employment Standards (NES) and therefore cannot be overridden by any alternative agreements or contractual clauses. In other words, if you have full time employees, you must allow them 4 weeks of paid annual leave.  

Part time employees are also entitled to annual leave, however, it is usually calculated based on the amount of hours they have worked. 

In some instances, employers can force their employees to take annual leave. However, this must be done carefully and only under limited circumstances.   

Is Leave Loading Compulsory?

Leave loading will not apply to all employees. However, for those that are entitled to leave loading, the answer is yes. It is compulsory to pay leave loading to those employees that are meant to have it – more on this below!

Who Is Entitled To Leave Loading?

Leave loading is an award, so its entitlement really depends on the industry you are in. Certain industries have a requirement that employees working in that field must receive leave loading when they are on annual leave, whereas others do not. 

In order to see whether the industry you are in carries the award of leave loading, you can visit Fair Work Australia for more information. 

How To Calculate Leave Loading

As we mentioned earlier, the usual rate for leave loading is 17.5%, however, it will depend on the employee and the industry as awards tend to differ. In order to get more tailored information for the leave loading amount you owe your employees, enter the relevant information on the Fair Work website so you can know more. 

Once you have confirmed the rate for leave loading, you can calculate the amount your employees are owed. 

Mike earns $650 a week. His leave loading amount is paid at a rate of 18%. The calculation for his leave loading will look something like this: 

$650 x 4 = $2,600  
$2,600 x 18% = $468
Mike’s leave loading payment is $468

How Does Leave Loading Work In NSW?

Leave loading is a national award, therefore, it will not differ across states.  In NSW, leave loading is just as applicable as it is in Queensland or the Northern Territory. The same applies for industries that qualify for leave loading awards. 

So, for instance, a construction worker in NSW that is entitled to leave loading can expect the same rates if they decide to do the same job in another state. 

Fair Work Australia Leave Loading 

Leave loading is protected by Fair Work Australia. As an employer, if you fail or refuse to pay leave loading to you employees that should be receiving it, then you are in breach of Fair Work regulations. 

Employers can be penalised for not following through on the obligations under Fair Work Australia, so it’s essential to ensure you are compliant. 

Is Leave Loading Paid On Termination?

Yes, if you terminate an employee who is entitled to leave loading, then any annual leave and leave loading they are owed will need to be paid out. 

Phoebe works for a large corporation that is downsizing. She’s paid a standard salary and still hasn’t taken her four weeks of annual leave at the time of receiving her termination notice. 

Phoebe’s employers will need to pay out the 4 weeks of annual leave she did not take and the additional leave loading amount. 

Is Super Payable On Leave Loading?

Yes, super is payable on leave loading. Super is paid earnings that are considered ‘ordinary time earnings’ which is essentially pay for normal hours of work. Any work that is done outside of it such as overtime or holiday pay does not contribute to super payments. 

Leave loading is considered part of ordinary time earnings, and therefore, super must be paid on it. If you decide not to pay super on leave loading, then you must provide a sufficient explanation to the Australian Taxation Office.  

What Are My Other Employer Obligations?

As an employer, leave loading is one of the many obligations you have towards your employees. People spend a good chunk of their time at work, which means their work environment must be one that supports their wellbeing. 

All employers have a duty of care towards their employees, where they need to ensure their employees are not harmed physically or psychologically at work.  

This also falls under general Work Health and Safety obligations employers have towards employees. Workplace health and safety sets the standard for creating a positive environment for employees to work in, whether they are working remotely or in the office. 

To know more about your workplace health and safety obligations, click here.  

Key Takeaways

Leave loading payments are an important responsibility employers need to fulfil if their employees qualify for it. To summarise what we’ve discussed: 

  • Leave loading payments are the additional payments employees receive on top of their usual pay, during annual leave
  • Annual leave is the paid holiday time employees are entitled to 
  • Not all employees are entitled to leave loading, however, it is compulsory to pay it to those that are meant to receive it under their award
  • Leave loading entitlements and rates will vary based on the industry, it’s best to visit Fair Work Australia for more information  
  • Leave loading applies nationally
  • If an employee is terminated before they can take their annual leave, they should have their annual leave and leave loading paid out to them 
  • Super is applicable to leave loading payments 

If you would like a consultation on leave loading or other employer obligations you may have, you can reach our team of employment lawyers at 1800 730 617 or for a free, no-obligations chat.

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