Annual Leave Loading in Australia: What It Is and Who Gets It

What Is Annual Leave Loading?

Annual leave loading — sometimes called holiday loading — is an additional payment of 17.5% on top of your ordinary pay rate when you take annual leave. It exists to compensate employees who would otherwise earn more money while working (through overtime, penalty rates, or shift allowances) compared to when they're on leave.

The idea is that a person working rotating shifts or regular overtime shouldn't be financially worse off for taking a holiday. The 17.5% rate is a standardised approximation of the average uplift those workers would have earned.

To see exactly how leave loading affects your holiday pay, try our Leave Calculator — it accounts for both base pay and the 17.5% loading where applicable.

Who Is Entitled to Leave Loading?

Annual leave loading is not a universal NES entitlement. It is provided by modern awards and enterprise agreements, not the Fair Work Act itself. Whether you receive it depends on:

• Whether your modern award or enterprise agreement includes a leave loading clause
• Whether your annualised salary arrangement already factors in leave loading
• Whether your employment contract explicitly provides or excludes it

Many modern awards — including the General Retail Industry Award, the Hospitality Industry Award, and the Manufacturing and Associated Industries Award — include a 17.5% leave loading clause. However, awards covering higher-paid professional roles often do not include it, on the basis that ordinary time earnings already exceed what would be earned with shift or overtime loadings.

How Is Annual Leave Loading Calculated?

The calculation is straightforward when leave loading applies:

Leave Loading = Ordinary Pay × 17.5%

For example, if your ordinary weekly pay is $1,200:

• Leave loading = $1,200 × 17.5% = $210
• Total weekly payment while on leave = $1,200 + $210 = $1,410

Your Hourly Rate Calculator can help you confirm your base ordinary rate before applying the loading. Some awards apply the higher of leave loading or the relevant penalty rate that would have applied — check your specific award to confirm.

Does Leave Loading Apply to Casual Employees?

No. Casual employees do not accrue annual leave and therefore do not receive leave loading. The casual loading (typically 25%) is intended to compensate casuals for the lack of leave entitlements, including annual leave, personal/carer's leave, and leave loading.

Is Leave Loading Paid When Leave Is Cashed Out?

Under the Fair Work Act, employees can cash out annual leave by agreement (subject to a maximum of 2 weeks per year and maintaining a minimum of 4 weeks' balance). Whether leave loading applies to a cash-out depends on your award or agreement. In many cases it does — the same 17.5% applies to cashed-out leave as to taken leave. Check your specific award or agreement.

What About Leave Loading on Termination?

When employment ends, any accrued but untaken annual leave must be paid out. Whether the 17.5% loading applies to this payout is a point of genuine ambiguity in Australian employment law. The general position is:

• If your award or agreement explicitly states that leave loading applies on termination, it does
• If the award or agreement is silent on termination, courts have generally found that loading only applies when leave is actually taken — not when it is paid out on termination
• If your employment contract specifically provides for loading on termination, it applies

Use our Take-Home Pay Calculator to model your net position including any leave payout, and speak to an accountant or the Fair Work Ombudsman if there is a dispute about loading on termination.

Is Annual Leave Loading Taxed?

Yes. Annual leave loading is taxed as ordinary income at your marginal rate. It does not receive the concessional treatment that applies to genuine redundancy payments or certain back-payments. Your employer should withhold PAYG at the appropriate rate.

How to Check if You're Getting It

The clearest indicator is your payslip — when you take annual leave, your payslip should show either an additional leave loading component or a combined leave payment that is 17.5% higher than your ordinary rate for the same period. If you can't tell from your payslip, ask your payroll team to confirm whether leave loading is being applied.

Keeping well-organised records of your leave taken, leave balance, and pay received makes it much easier to identify any shortfall. A decent filing system — like the home office filing organisers available on Amazon AU — costs almost nothing compared to the time it saves if you ever need to backtrack on payroll records.

What If You're Missing Leave Loading?

If your award includes leave loading and you haven't been receiving it, you may be owed back-payments going up to 6 years. Raise it with your employer's payroll team first. If it isn't resolved, lodge a complaint with the Fair Work Ombudsman online or by calling 1300 724 690.