Annual leave loading¶

Leave loading is an extra amount that some employees get on top of their normal pay when they take annual leave. In other words, they are paid a little more for the weeks they are on holiday than for the weeks they are at work.

The important thing to know is that leave loading is not something every employee gets. It comes from the award or registered agreement that covers the job. If that document says leave loading applies, the employee gets it. If it does not, they do not.

In one line

Leave loading is an extra amount paid on top of base pay when some employees take annual leave — whether it applies, and how much, comes from the award or agreement.

Why this matters¶

Employees sometimes expect a higher amount when they take annual leave, and sometimes they do not. Both can be correct. Knowing where leave loading comes from helps you work out whether one of your employees should get it, and stops you paying it to someone whose award does not include it — or forgetting it for someone whose award does.

What you will learn¶

What annual leave loading is
Why leave loading comes from the award or agreement, so not everyone gets it
How leave loading is generally taxed

Understanding the concept¶

An award is a document that sets out the minimum pay and conditions for a type of work or industry. A registered agreement is a similar document made between an employer and its employees and approved by the Fair Work Commission. Fair Work explains that most awards set out whether employees are paid leave loading when they take annual leave.

Where leave loading applies, it is worked out as a percentage on top of the base rate for the annual leave being taken. A figure of 17.5% is common in many awards, but it is not a universal rule. The actual rate — and whether leave loading applies at all — depends on the award or registered agreement for that job. Some awards use a different figure, and some do not include leave loading at all.

So the first step is always the same: check the award or agreement that covers the employee. That document is what decides it.

For accountants & bookkeepers

Leave loading is an award or agreement condition, not a National Employment Standards entitlement in itself — the NES sets the four weeks of paid annual leave, while the loading (and its rate) sits in the industrial instrument. Note the separate protection at the end of employment: Fair Work states that unused annual leave paid out on termination must include leave loading if the loading would have applied when the employee took the leave, even where the award, agreement or contract says loading is not payable on termination.

Example¶

Priya works in a role covered by an award that includes leave loading. When she takes a week of annual leave, she is paid her normal weekly amount plus the extra loading percentage set by her award. Her payslip shows the base annual leave pay and the loading as separate lines.

Sam works in a role covered by a different award that does not include leave loading. When Sam takes a week of annual leave, he is paid his normal weekly amount, with no extra loading. Both are being paid correctly, because each is being paid according to the award that covers their job.

Common mistakes¶

Assuming every employee gets leave loading — it depends on the award or agreement.
Assuming the rate is always 17.5% — the actual figure comes from the award, and can differ or not apply at all.
Forgetting to include leave loading when it does apply, so the employee is underpaid for their annual leave.

How this works in myaccountant¶

In the app — if the employee is entitled to leave loading, you can set it up as a separate leave loading pay item so it is added on top of their annual leave pay in the pay run. It then appears as its own line on the payslip, next to the annual leave pay, so both the employee and you can see it clearly.

Key points¶

Leave loading is an extra amount paid on top of base pay when some employees take annual leave.
Whether it applies, and the rate, comes from the award or registered agreement — it is not a universal entitlement.
A figure of 17.5% is common, but do not assume it always applies; check the award.
Leave loading paid to a current employee is generally taxed as part of normal earnings, along with the rest of their pay.
Always check the award or agreement to work out whether leave loading applies.

Learn next¶

General information only — not tax, super or financial advice.

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