What is leave loading?
Leave loading is an entitlement that is provided to employees under modern awards. It is an additional payment that some employees receive when they take annual leave. Most modern awards provide for a leave loading of 17.5% of the minimum rate of pay or the applicable penalty rate, whichever is higher.
What does that mean?
Ordinarily, employees are paid their ordinary rate, excluding penalties, allowances, etc., of pay when taking paid annual leave. When an employee is entitled to annual leave loading, they must be paid their minimum hourly rate of pay plus annual leave loading at the applicable rate.
Is leave loading paid on an employee’s remaining annual leave at termination?
Yes. If an employee receives annual leave loading when they take annual leave, leave loading must also be paid on any accrued and remaining annual leave at termination.
Are salaried employees and managers entitled to leave loading?
It depends. Often managers are not covered by a modern award, but in some cases they are. Annual leave loading is an award entitlement so if an employee is not covered by a modern award, then they are not entitled to annual leave loading.
If a manager or salaried employee is covered by a modern award, then they are entitled to leave loading. However, these employees are usually paid an above-award salary. In this case, the employer can offset the obligation to pay leave loading, provided that this is stated in the employee’s employment contract and the salary is sufficiently high enough to offset leave loading (and any other applicable entitlements).
How is leave loading calculated?
Generally, leave loading is calculated as follows:
- 4 x 17.5% x Employee’s Weekly Rate of Pay