Annual leave loading: Do I have to pay it?

It depends – you need to check the award that covers your particular employee because annual leave loading is regulated by the Fair Work Commission.

An employer failing or refusing to pay the loading to employees with an entitlement to receive the payment is in breach of their Fair Work Act obligations.

Question of the week

A recent question we received: Hi Bare Bones Consulting, I run a physiotherapy clinic. Do we need to pay our employees annual leave loading?

Physiotherapists and those providing associated services (such as Medical Receptionists) will have coverage under the Health Professionals and Support Services Award 2020.

Clause 27.3 of the Award states:

Annual leave loading

For the period of annual leave in addition to their ordinary pay:

(a) an employee, other than a shift worker, will be paid an annual leave loading of 17.5% of their minimum rate of pay;…

So the short answer in this situation – Yes, you do need to pay leave loading.

Here’s some general information on leave loading so you can sweep the floor with your competition at your next HR trivia night (and even I concede that would be a shite night out!).

What is annual leave loading?

Leave loading is an entitlement present in most Modern Awards that allows for an additional payment on top of the employee’s base rate of pay when the person takes annual leave. 

Origins of leave loading

Leave loading is a legacy from the 1970s labour movement when many workers were accustomed to working overtime hours.

When workers took annual leave, they did not have the opportunity to earn additional income through overtime.

As a result, leave-loading entitlements were introduced to make up for this imbalance and afford the employee some additional funds to enjoy their holidays.

Today, the entitlement to leave loading exists in many Modern Awards and Enterprise Agreements.

What’s the loading?

While most Awards provide for a 17.5 per cent leave loading, there may be a higher entitlement other industries.

The General Retail Industry Award 2010 for example provides the leave loading is 17.5 per cent or the employee’s minimum hourly rate for all ordinary hours of work in the period inclusive of penalty rates – whichever is greater.

The Fair Work Ombudsman website has a handy page on calculating annual leave loading here. 

Who doesn’t get leave loading?

Leave loading isn’t an automatic entitlement. Whether or not it’s payable is determined by the employee’s Award, Enterprise Agreement or employment contract.

Most Modern Awards include leave loading.

When is leave loading paid?

Leave loading is usually paid at the time the employee takes annual leave. It is usually paid along with the normal pay during the regular pay cycle.

In most circumstances on termination of employment, the loading is to be paid out on any accrued annual leave balance.

See also cashing out annual leave.

Where to from here? 

The calculation of leave loading is governed by the terms of the relevant Award or Enterprise Agreement.

This is main reason you need to know what Award (or Awards) cover your team.

If you’re not sure how Awards and their associated entitlements apply in your workplace, why not check out our HR Trouble Shooting page then give Greg a call on 07 5576 4693 

Contact Greg for a Free HR Consultation

Bare Bones Consulting is an expert HR consultant on the Gold Coast that services small businesses in Brisbane and operates Australia-wide.

Give Greg a call on 07 5576 4693 or contact us online.