Leave loading is an additional payment of 17.5% on top of an employee’s normal pay when they take annual leave in Australia, and calculating it correctly requires understanding the average weekly earnings formula, the interaction with Modern Awards, and the cap that applies. Leave loading is not a universal right — it depends on the applicable Modern Award or enterprise agreement, and many employers are unaware of the obligation until they face a Fair Work complaint.

This guide walks through the leave loading calculation with worked examples and explains the rules that determine whether your employees are entitled to it.

Key takeaways

  • Leave loading is 17.5% of the employee’s normal weekly pay when they take annual leave.
  • Leave loading is not a universal statutory right — it is provided by Modern Awards, enterprise agreements, or employment contracts.
  • The loading is calculated on the employee’s average weekly earnings (not just base salary).
  • Leave loading is capped at the ATO benchmark rate — for 2025/26, the maximum is $175.60 per week (17.5% × $1,003.40).
  • Leave loading may be waived if the employee uses leave loading to increase superannuation contributions.

What is leave loading?

Leave loading compensates employees for the loss of overtime or other penal-rate income they would have earned if they had worked instead of taking leave. The concept originated in the metal industry awards and has been carried into most Modern Awards and enterprise agreements.

Leave loading is paid when the employee takes annual leave. It is not paid on public holidays (which are separate from annual leave) or on long service leave (unless the applicable instrument provides for it).

Am I entitled to leave loading?

Check these sources in order:

  1. Modern Award — most Modern Awards (e.g., Clerks—Private Sector Award 2020, Manufacturing and Associated Industries and Occupations Award 2020) include leave loading provisions.
  2. Enterprise agreement — if an enterprise agreement applies, it may specify leave loading terms that override the Award.
  3. Employment contract — the contract may include or exclude leave loading.
  4. National Employment Standards (NES) — the NES does not mandate leave loading. If no Award, agreement, or contract provides for it, there is no entitlement.

The calculation

Step 1: Determine average weekly earnings

Average weekly earnings include all amounts that would have been earned during the leave period. This typically includes:

  • Base salary
  • Regular overtime (consistent pattern)
  • Regular allowances
  • Commission or piece rates (if regular)
  • Shift loadings

Formula:

Average weekly earnings = total gross earnings in the previous 12 months ÷ 52

Or, if the employee has not been employed for 12 months, use the actual period of employment.

Step 2: Calculate 17.5%

Leave loading = average weekly earnings × 17.5%

Step 3: Apply the cap

The leave loading is capped at 17.5% of the average weekly ordinary time earnings as determined by the Fair Work Commission. For 2025/26, the cap is approximately $175.60 per week.

If 17.5% of the employee’s average weekly earnings exceeds the cap, the loading is limited to the cap amount.

Worked example 1: Standard full-time employee

  • Annual salary: $80,000
  • Weekly salary: $80,000 ÷ 52 = $1,538.46
  • Leave loading: $1,538.46 × 17.5% = $269.23 per week
  • Cap check: $269.23 > $175.60, so loading is capped at $175.60 per week

Worked example 2: Part-time employee

  • Annual salary: $50,000 (3 days per week)
  • Weekly salary: $50,000 ÷ 52 = $961.54
  • Leave loading: $961.54 × 17.5% = $168.27 per week
  • Cap check: $168.27 < $175.60, so loading is $168.27 per week

Worked example 3: Employee with regular overtime

  • Base salary: $70,000
  • Regular overtime: $15,000/year
  • Total earnings: $85,000
  • Average weekly earnings: $85,000 ÷ 52 = $1,634.62
  • Leave loading: $1,634.62 × 17.5% = $286.06 per week
  • Cap check: $286.06 > $175.60, so loading is capped at $175.60 per week

Paying leave loading

Leave loading is paid at the same time as the annual leave payment. It is subject to:

  • Income tax — leave loading is taxable
  • Superannuation — leave loading is included in ordinary time earnings for superannuation guarantee purposes
  • PAYG withholding — the employer must withhold tax at the applicable rate

Waiving leave loading

In some circumstances, employees may waive leave loading in exchange for increased superannuation contributions. This is permitted under certain conditions set out in the Fair Work Regulations, but the waiver must be genuine, voluntary, and documented.

Putting it into practice

Five checks to ensure your leave loading calculations are correct:

  1. Identify the applicable Modern Award or enterprise agreement and confirm leave loading applies.
  2. Calculate average weekly earnings including all regular components (base, overtime, allowances).
  3. Apply the 17.5% rate and check against the annual cap.
  4. Pay leave loading at the same time as the annual leave payment.
  5. Withhold tax and include in superannuation calculations.
You can take advantage of the free 14 days trial and explore Leave Balance.

Leave Balance auto-calculates leave loading alongside annual leave — applying the 17.5% rate, respecting the cap, and handling part-time pro rata — so every employee gets the correct loading without manual calculation.

Frequently asked questions

Leave loading is not mandated by the National Employment Standards. However, most Modern Awards and many enterprise agreements include leave loading provisions. If an Award or agreement applies, leave loading is a legal obligation.

What is the leave loading rate in Australia?

The standard leave loading rate is 17.5% of the employee’s average weekly earnings. This rate applies across most Modern Awards and has been consistent for many years.

Does leave loading apply to long service leave?

It depends on the applicable instrument. Some Modern Awards and enterprise agreements include leave loading on long service leave, while others do not. Check the specific provisions of the relevant Award or agreement.

Is leave loading capped?

Yes. Leave loading is capped at 17.5% of the average weekly ordinary time earnings as set by the Fair Work Commission. The cap is updated annually.

Do I pay leave loading on public holidays?

No. Leave loading is paid on annual leave, not on public holidays. Public holidays are separate entitlements under the NES and are paid at the applicable rate (typically base pay or penalty rates if the employee works).

This article is general information, not legal advice. Consult qualified employment counsel for jurisdiction-specific guidance.