Annual leave loading is the extra 17.5% that lands on top of your ordinary pay when you take annual leave. It is one of the most familiar figures in Australian pay, and one of the most misunderstood, because a very large number of people believe it is a legal right that every employee has. It is not. The Fair Work Act does not provide it. This guide explains where it actually comes from, who gets it, and why it exists at all.
Key takeaways
- Leave loading is not in the National Employment Standards. The Act pays annual leave at base rate only.
- It comes from your modern award, enterprise agreement or contract. If none of those provide it, you do not get it.
- The standard figure is 17.5% of ordinary pay for the leave taken.
- It exists to replace the penalty and overtime earnings a shift or weekend worker loses while on leave.
- Where your award provides it, loading is generally also payable on unused leave paid out when you leave.
What leave loading is
When you take a week of annual leave, your employer pays you for that week as though you had worked it. Leave loading adds a further 17.5% on top. On a $1,200 week, the loading is $210, making $1,410.
The rate is 17.5% across every award on this site. What varies between awards is not the percentage but whether a higher-of test applies, which can push the real figure above 17.5% for people who regularly work weekends or shifts. That mechanic is worked through in how to calculate leave loading.
Why it is not in the NES
This is the part that surprises people. Section 90(1) of the Fair Work Act sets what you are paid for annual leave:
An employee taking a period of paid annual leave must be paid at the employee's base rate of pay for the employee's ordinary hours of work in the period.
Base rate of pay is a defined term, and it excludes loadings, monetary allowances, overtime, penalty rates, incentive payments and bonuses. So the statutory floor for annual leave is your plain hourly rate and nothing more. There is no 17.5% anywhere in the National Employment Standards.
Leave loading survives because modern awards and enterprise agreements add it back. Every one of the 33 awards on this site provides 17.5%. But an employee who is genuinely award-free and whose contract is silent has no entitlement to it, and that is a lawful outcome rather than an underpayment.
Who actually gets it
Work through it in this order:
- Covered by a modern award? Almost certainly yes. All 33 awards on this site provide 17.5% loading. Find yours on the award index.
- Covered by an enterprise agreement? Check the agreement. Most carry loading, some roll it into a higher base rate instead, which is lawful provided the agreement passes the better off overall test.
- Award-free, on a common law contract? Only if your contract says so. Many salaried professional roles do not provide it, and instead pay a salary set above award level.
A common arrangement in salaried roles is an annualised salary that expressly absorbs loading and penalties. That is permitted, but the salary must leave you no worse off than the award would have. If you are not sure which award applies, start with the modern awards guide.
Why it exists at all
Leave loading is a historical fix for a real problem. A shift worker or weekend worker earns penalty rates as a routine part of their income. If annual leave were paid at base rate only, taking leave would mean a pay cut, and the practical effect would be a disincentive to take the leave you are entitled to.
Loading exists to close that gap. That origin explains the design of the higher-of test: where the penalties you would have earned exceed a flat 17.5%, several awards pay the penalties instead, so that you are not worse off for having taken leave.
Leave loading when you leave
Section 90(2) requires untaken annual leave to be paid out at the amount that would have been payable had you actually taken the leave. Where your award provides loading on annual leave, that generally carries into the termination payment as well, and most awards say so expressly.
Tax treatment differs from ordinary pay: unused leave paid out on termination is taxed under the schedules for lump sum payments rather than as normal wages. Our annual leave payout tax guide covers that, and the annual leave payout calculator estimates the figure.
Common questions
Is leave loading compulsory in Australia?
No. It is compulsory only where an award, enterprise agreement or contract provides it. The Fair Work Act pays annual leave at base rate and does not require loading.
Do casuals get leave loading?
No, because casuals do not accrue paid annual leave. The 25% casual loading is the compensation for that.
Is leave loading paid on long service leave?
Usually not. Long service leave is state legislation and is generally paid at ordinary pay without the 17.5% loading, though a small number of states and instruments differ. Check the rules for your state on the long service leave pages.
Is leave loading taxed differently?
Leave loading taken as part of ordinary annual leave is taxed as normal income. Loading inside a termination payout follows the lump sum rules instead.
Author & reviewer
Sarah has spent over a decade advising Australian SMBs on Fair Work, NES compliance, and payroll. Based in Sydney, she has worked across hospitality, retail and professional services.