If you’ve ever looked at a payslip covering a holiday and noticed the pay was a little higher than your normal wage, you may have received annual leave loading — an extra 17.5% on top of your base pay while you were on annual leave. Many Australian workers assume it’s a standard legal right, like annual leave itself. It isn’t.
The short answer: annual leave loading is a 17.5% bonus paid on your ordinary pay while you take annual leave, but only if your award, enterprise agreement or employment contract says so. It is not part of the National Employment Standards, and the Fair Work Act doesn’t mention it at all in its annual leave provisions. Whether you get it depends entirely on the instrument that governs your employment.
In this guide, we’ll cover what annual leave loading is, who qualifies, how it’s calculated, what happens when employment ends, and how it’s taxed.
What Is Annual Leave Loading?
Annual leave loading is an additional payment of 17.5% of an employee’s base (ordinary) rate of pay, paid for the period they are on annual leave. Think of it as a “holiday bonus”: for every week of annual leave you take, you receive your normal week’s pay plus an extra 17.5% on top.
For example, if your ordinary pay is $1,000 per week, one week of annual leave would pay you $1,000 in ordinary wages plus $175 in leave loading — a total of $1,175 for the week.
The loading is calculated on your base rate only — not on overtime, allowances or other penalty payments. This follows from its original purpose: compensating workers for the penalties and overtime they missed while on leave.
One of the most common misconceptions about annual leave loading is that it’s guaranteed under the Fair Work Act. It is not a National Employment Standards entitlement. Under the NES, full-time and part-time employees are entitled to 4 weeks of paid annual leave per year (casual employees do not accrue annual leave at all), but nothing in the NES requires an employer to pay the extra 17.5%. The entitlement comes — or doesn’t — from your modern award, enterprise agreement, or individual employment contract.
Is Annual Leave Loading Guaranteed? Who Gets It and Who Doesn’t
Whether you receive annual leave loading depends entirely on the industrial instrument covering your employment. Here’s how it typically breaks down:
| Worker | Annual leave loading? | Why |
|---|---|---|
| Employee covered by an award that includes loading | Yes — 17.5% | The award creates the entitlement |
| Employee under an enterprise agreement with loading | Yes — per the agreement | The agreement sets the terms |
| Employee whose contract provides for loading | Yes — per the contract | The contract creates the entitlement |
| Shiftworker | Yes — often the greater amount | Many awards give shiftworkers the greater of 17.5% or their shift penalty rates |
| Employee on an award that excludes loading (e.g. General Retail Industry Award) | No | Penalties are already baked into the pay structure |
| Casual employee | No | Casuals do not accrue annual leave, so there is no leave for loading to attach to |
| Award/agreement/contract silent on loading | No | With no instrument creating it, there is no legal entitlement to loading |
If you’re unsure whether you’re covered, check your modern award on the Fair Work Ombudsman’s website, read your enterprise agreement, or ask your employer or HR team. Your payslips can also be a giveaway — leave loading is usually listed as its own line item when leave is paid.
Awards That Don’t Pay It
Not every award includes annual leave loading. A well-known example is the General Retail Industry Award, where penalty and loading arrangements are already built into the way retail pay is structured, so no separate leave loading is payable. If you’re covered by an award like this, your leave is simply paid at your ordinary rate.
Shiftworkers Often Get the Better Deal
For shiftworkers, many awards take a different approach: instead of a flat 17.5%, the shiftworker receives the greater of the 17.5% loading or the shift penalty rates they would have earned had they worked their rostered shifts during the leave period. This recognises that shift penalties often exceed 17.5%, so a flat loading would leave shiftworkers worse off.
If you regularly work overtime on top of your ordinary hours, it’s worth understanding what your leave pay is made up of — our overtime calculator can help you model how overtime affects your usual take-home pay, so you can compare it with what you receive while on leave.
Where Did the 17.5% Figure Come From?
The 17.5% figure isn’t arbitrary — it has deep roots in Australian industrial history. Annual leave loading dates back to the 1970s union movement, when unions campaigned for compensation for workers who lost out on overtime and shift penalty payments whenever they took holidays.
The logic was straightforward: a worker who regularly boosted their income with overtime or penalty rates would take a pay cut simply by going on leave. The 17.5% loading was introduced as a rough average of the penalties workers forfeited — a “holiday bonus” that kept leave pay closer to what the employee would have earned had they stayed at work.
That origin explains why loading is tied to ordinary rates and why it exists in awards and agreements rather than in the legislation itself: it was won industry by industry through union negotiation, not granted as a universal statutory right.
How Annual Leave Loading Is Calculated
The calculation itself is simple: ordinary pay for the leave period × 17.5%.
Step by step:
- Work out your ordinary (base) pay for the leave period — for a salaried employee, divide your annual salary by 52 and multiply by the number of weeks of leave.
- Multiply that figure by 0.175 to get the loading amount.
- Add the loading to your ordinary leave pay to get the total.
Worked Examples
| Base pay | Leave taken | Ordinary leave pay | Loading (17.5%) | Total paid |
|---|---|---|---|---|
| $1,000 per week | 1 week | $1,000 | $175 | $1,175 |
| $1,500 per week | 2 weeks | $3,000 | $525 | $3,525 |
| $2,000 per week | 1 week | $2,000 | $350 | $2,350 |
| $90,000 salary | 4 weeks | $6,923 | $1,212 | $8,135 |
Let’s walk through the $90,000 salary example. A $90,000 annual salary works out to roughly $1,730.77 per week ($90,000 ÷ 52), so four weeks of annual leave pays $6,923.08 in ordinary wages. The 17.5% loading on that is $1,211.54, rounded to $1,212 — for a total of approximately $8,135 for the four weeks, instead of $6,923 without loading.
Want to work out your own leave pay? Our annual leave calculator lets you plug in your salary and leave balance to estimate what your annual leave — including any loading you’re entitled to — is worth.
What Happens When Your Employment Ends?
One of the most important — and least known — features of annual leave loading is what happens at termination. If you are entitled to loading on your annual leave, that entitlement follows your accrued but unused leave out the door.
Section 90(2) of the Fair Work Act 2009 provides that when employment ends, an employee must be paid out their accrued unused annual leave at the amount they would have received had they taken the leave at that time. That means if your award, agreement or contract gives you leave loading while on leave, your employer must also pay the loading on the leave balance paid out on termination.
In practice: if you resign with three weeks of accrued annual leave and your award provides 17.5% loading, your final pay should include the loading on those three weeks — not just the base rate.
The same principle applies to cashing out annual leave. Where an employee has a loading entitlement and cashes out leave in accordance with the rules (which generally require a written agreement and a remaining balance of at least 4 weeks), the loading attaches to the cashed-out leave as well.
Is Annual Leave Loading Taxed?
Yes. Annual leave loading is taxable income — it is not tax-free, and it is not treated concessionally. Like your ordinary wages, it is subject to PAYG withholding by your employer, and it counts toward your taxable income for the financial year in which it is paid.
This is a common point of confusion, partly because the loading feels like a bonus. But for tax purposes, the ATO treats it as ordinary employment income: your employer withholds tax from it at your marginal rate (through the normal PAYG tables) and reports it as part of your gross salary and wages on your income statement.
The practical consequence: that $1,212 of loading in our $90,000 example doesn’t land in your bank account in full — tax is withheld first, just as it is on the rest of your pay.
Frequently Asked Questions
Is annual leave loading guaranteed for all Australian workers?
No. Annual leave loading is not a National Employment Standards entitlement, and the Fair Work Act‘s annual leave provisions don’t mention it. You only receive it if your modern award, enterprise agreement or employment contract provides for it. If none of those instruments mentions loading, your employer has no legal obligation to pay it.
Do casual employees get annual leave loading?
No. Casual employees do not accrue annual leave under the NES, so there is no annual leave for loading to be paid on. Casuals instead receive a casual loading on their hourly rate to compensate for the lack of leave entitlements.
Do I get leave loading paid out when I resign or am terminated?
If you were entitled to loading while on leave, yes. Under section 90(2) of the Fair Work Act, accrued unused annual leave must be paid out at the amount you would have received had you taken the leave — which includes the loading where the entitlement exists. Check your final payslip to make sure it’s there.
Is annual leave loading taxed?
Yes. Leave loading is taxable employment income subject to normal PAYG withholding. It is included in your gross salary and wages on your income statement and counts toward your taxable income for the year.
Why is it 17.5% — and do I get more as a shiftworker?
The 17.5% figure comes from 1970s union campaigns, designed to roughly compensate workers for the overtime and penalty rates they gave up while on leave. If you’re a shiftworker, many awards don’t limit you to 17.5%: you instead receive the greater of the 17.5% loading or the shift penalties you would have earned on your rostered shifts.
Can I cash out annual leave and still get the loading?
Where your award, agreement or contract allows cashing out (usually requiring a written agreement and leaving at least 4 weeks of accrued leave untouched), the loading attaches to the cashed-out leave if the loading entitlement exists. The cashed-out amount is paid at what you would have received had you taken the leave — loading included.
Conclusion
Annual leave loading — that extra 17.5% on your base pay while you’re on holiday — is one of Australia’s most misunderstood pay entitlements. It’s generous when you have it, but it’s not universal: it lives in your award, enterprise agreement or contract, not in the Fair Work Act itself. The key takeaways: check your industrial instrument to confirm you’re covered, remember the loading follows your unused leave balance when employment ends, and don’t forget it’s taxable income.
If you’re planning time off and want to know exactly what your leave is worth — loading included — run the numbers with our annual leave calculator. Enter your salary and leave balance, and see what your next holiday should actually pay you.