Leave loading is an additional payment—usually 17.5% of base pay—paid to eligible employees when they take annual leave. It was originally introduced to compensate workers for the potential loss of overtime or penalty rates they would miss out on while on paid leave. In Australia, this entitlement is typically governed by the applicable modern award, enterprise agreement, or individual employment contract.
Many employees, particularly in industries like retail, hospitality, and healthcare, earn more than their base rate due to:
When these employees go on annual leave, they miss out on those extra earnings. Leave loading compensates for this gap, ensuring that taking time off doesn’t cause financial strain.
While leave loading isn’t a universal requirement, it is a common entitlement under many awards and agreements. Employers must always refer to the relevant industrial instrument to determine whether leave loading applies.
In most awards, leave loading is 17.5% of the employee’s base rate of pay for the period of annual leave taken. However, some awards provide a higher percentage, while others calculate loading based on average earnings (including shift penalties or overtime).
If an employee earning $1,000 per week takes one week of annual leave, their pay might be:
Note: Superannuation must also be paid on annual leave, including the leave loading component if it's considered ordinary time earnings (OTE), which is usually the case under ATO guidelines.
Employees covered by the following may be entitled to leave loading:
If an award or agreement does not include leave loading, employers may choose to provide it voluntarily as part of a competitive benefits package. However, it’s not legally required in that case.
⚠️ Employers must not “contract out” of leave loading if it’s a required entitlement under an applicable award.
Many awards in Australia prescribe 17.5% leave loading, including:
Each award may contain different rules about when and how leave loading is paid (e.g. some may apply it only to the first four weeks of annual leave).
If an employee has accrued but unused annual leave when their employment ends, their final payout must include:
Failing to include leave loading in a termination payout when required can lead to non-compliance penalties and disputes.
Microkeeper’s all-in-one HR and payroll platform supports:
that clearly itemise loadingWhether you manage a small team or a national workforce, Microkeeper ensures leave entitlements are calculated correctly and compliantly.
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Do all employees get leave loading?
No. Only employees covered by an award, EBA, or contract that provides for it are entitled. Others may receive it voluntarily if agreed upon with the employer.
Can leave loading be "rolled into" a higher salary?
Only if clearly documented in a contract and compliant with award or agreement requirements. Otherwise, it must be paid separately.
Is leave loading included in ordinary time earnings for super?
Yes, if the leave loading relates to annual leave taken, not termination payments.
Is leave loading taxed differently?
No, it's taxed the same as other wages via PAYG withholding.
Leave loading is a key entitlement that ensures employees are fairly compensated when taking annual leave. For employers, accurate tracking and compliance with award requirements is essential. Leveraging smart payroll systems like Microkeeper can save time, prevent errors, and support a transparent and fair workplace.
Disclaimer: This information is general and should not be taken as legal or financial advice. Please consult the Fair Work Ombudsman or a qualified adviser for guidance specific to your circumstances.
