What is annual leave loading and can I benefit from it?

By law, you’re entitled to receive your normal pay when you are on annual leave. But some people receive an additional amount known as leave loading, meaning a payment to compensate for loss of income from allowances and overtime. Annual leave loading helps employees meet expenses related to annual leave. The percentage of this additional pay depends on what’s stipulated in the award covering their industry sector. 

All employed persons aren’t automatically entitled to leave loading. Those on an award agreement, which is a legal document setting out minimum rates of pay for a particular industry, are more likely to have annual leave loading included in their salary package. Leave loading is a part of most modern awards and enterprise agreements. Sectors covered by awards that stipulate annual leave loading include building and construction, fast food, hair and beauty, private sector clerical staff, and some public servants.

If you’re not sure whether your employment agreement includes leave loading, you should check with your employer. If your job is covered by an award or enterprise agreement that includes annual leave loading, you will be entitled to receive this even if you haven’t specifically discussed it when you signed the employment contract. 

Leave loading has been the norm in Australia since the 1970s. The rationale behind this practice was to support workers who rely on additional income derived from overtime, shift earnings or other allowances. With leave loading, they can earn approximately the same amount when they’re on leave. 

Most of the industry awards specify that the loading must be either 17.5 per cent of wages or the greater of weekend or shift penalty rates and the national standard.

Your employer could give you this amount before, during or after you take your annual leave.  it may be added to your next salary or paid to you separately. Check your payslips after your vacation to see that you’ve received your annual leave loading payment.

If you leave your job, the Fair Work Act of 2009 states that the annual leave and matching leave loading amount will be paid to you.

If you own a business, do you have to pay annual leave loading? The answer depends on the nature of your industry. You need to check whether there is an industrial instrument that requires you to do this.

If you qualify for superannuation guarantee (SG) contributions, your employer will need to include annual leave loading payments in your earnings and calculate SG contributions on the total.