Australian leave loading is a payment of 17.5% on top of the employee’s base rate of pay during annual leave — it is not a NES entitlement but is commonly provided by Modern Awards and enterprise agreements to compensate employees for the loss of overtime and penalty payments they would have earned while working. The 17.5% rate is the standard across most Awards, though some cap the payment at the minimum weekly wage. Leave loading is paid when the employee takes annual leave, and it does not accrue on the loading itself.
This guide covers the leave loading payment, which Awards include it, how it is calculated, the capping rules, and the employer’s obligations.
Key takeaways
- Leave loading is a 17.5% payment on top of the employee’s base rate of pay during annual leave.
- It is not a NES entitlement — it comes from Modern Awards and enterprise agreements.
- Most Modern Awards include a leave loading provision — the employer must check the applicable Award.
- The loading is capped at the minimum weekly wage under many Awards.
- Leave loading is paid when the employee takes leave — it does not accrue on the loading itself.
Which Awards include leave loading?
The following table summarises the most common Modern Awards that include a leave loading provision:
| Award | Leave loading | Capping |
|---|---|---|
| Hospitality Industry (General) Award | 17.5% | Capped at minimum weekly wage |
| Clerks—Private Sector Award | 17.5% | Capped at minimum weekly wage |
| Banking Award | 17.5% | Capped at minimum weekly wage |
| Health Professionals Award | 17.5% | Capped at minimum weekly wage |
| Manufacturing and Associated Industries Award | 17.5% | Capped at minimum weekly wage |
| Retail Award | 17.5% | Capped at minimum weekly wage |
| Local Government Award | 17.5% | Capped at minimum weekly wage |
| Social, Community, Home Care and Disability Services Award | 17.5% | Capped at minimum weekly wage |
The capping at the minimum weekly wage means the leave loading cannot exceed the national minimum weekly wage (approximately $882.75 as of 2025–26). For most employees, the 17.5% calculation falls below the cap — the cap only affects very high-earning employees.
How leave loading is calculated
Leave loading is calculated as 17.5% of the employee’s base rate of pay during the annual leave period:
Leave loading = 17.5% × (Base rate of pay for the leave period)
The base rate of pay is the employee’s ordinary rate — it excludes overtime, bonuses, commissions, and other loadings. The leave loading itself is calculated on the base rate, not on the base rate plus overtime.
Worked example
An employee earns $1,200/week base salary and takes 1 week of annual leave:
- Base salary during leave: $1,200
- Leave loading (17.5%): $1,200 × 0.175 = $210
- Total payment for the leave week: $1,200 + $210 = $1,410
Capping example
An employee earns $6,000/week base salary and takes 1 week of annual leave:
- Base salary during leave: $6,000
- Leave loading (17.5%): $6,000 × 0.175 = $1,050
- Minimum weekly wage cap (approx. $882.75): $882.75
- Leave loading paid: $882.75 (capped)
- Total payment: $6,000 + $882.75 = $6,882.75
When leave loading is paid
Leave loading is paid when the employee takes annual leave. It is not paid on:
- Accrued leave — the loading does not accrue on the loading itself
- Leave on termination — when accrued leave is paid out on termination, it is paid at the base rate only (no leave loading)
- Public holidays during leave — the public holiday adjustment reduces the leave days, and the loading is calculated on the actual leave days taken
The distinction between leave loading on leave taken and leave on termination is important — employees who cash out or receive payment for accrued leave on termination do not receive leave loading.
Employer obligations
Six core duties apply to Australian leave loading management:
- Check the applicable Award — confirm whether the Modern Award includes a leave loading provision
- Calculate at 17.5% — apply the correct rate to the employee’s base rate of pay during leave
- Apply the cap — if the Award caps the loading at the minimum weekly wage
- Pay when leave is taken — not when leave accrues or on termination
- Record the payment — keep records of leave loading paid under s.535 Fair Work Act
- Apply the correct base rate — exclude overtime, bonuses, and other loadings from the calculation
Common pitfalls
1. Not paying leave loading
If the Modern Award includes a leave loading provision, the employer must pay it. Failing to pay leave loading is a breach of the Award and may trigger an underpayment claim.
2. Calculating on the wrong base
Leave loading is calculated on the employee’s base rate of pay, not on the base rate plus overtime, bonuses, or other loadings. Calculating on the wrong base creates an overpayment or underpayment risk.
3. Paying leave loading on termination
Leave loading is not paid on accrued leave paid out on termination. The payment is only made when the employee actually takes annual leave.
4. Not applying the cap
Many Awards cap leave loading at the minimum weekly wage. Paying above the cap creates an overpayment that may be difficult to recover.
5. Not checking the Award
Leave loading is not a NES entitlement. If the Modern Award does not include a leave loading provision, the employer is not obligated to pay it. The employer must check the applicable Award.
For more Australian context, see our guide to Australian annual leave and Australian personal leave.
A leave management system that calculates leave loading at 17.5%, applies the correct capping rules, and processes the payment when leave is taken keeps your Australian leave compliance accurate and efficient.
Frequently asked questions
What is leave loading in Australia?
Leave loading is a payment of 17.5% on top of the employee’s base rate of pay during annual leave. It compensates employees for the loss of overtime and penalty payments while on leave.
Is leave loading a NES entitlement?
No. Leave loading is not a NES entitlement. It comes from Modern Awards and enterprise agreements. The employer must check the applicable Award for the provision.
When is leave loading paid?
Leave loading is paid when the employee actually takes annual leave. It is not paid on accrued leave or on leave paid out on termination.
Is leave loading capped?
Many Awards cap leave loading at the minimum weekly wage (approximately $882.75 as of 2025–26). The cap only affects very high-earning employees.
Do all employees get leave loading?
Only employees covered by a Modern Award or enterprise agreement that includes a leave loading provision are entitled to it. Employees not covered by such an Award do not receive leave loading.
Sources
Last updated: 26 July 2026. This article is general guidance, not legal advice. Leave loading entitlements depend on the applicable Modern Award or enterprise agreement — confirm current terms with the Fair Work Ombudsman.