Leave loading represents an additional payment made to employees when they take paid annual leave. This payment, typically calculated as 17.5% of the employee’s ordinary pay, is intended to compensate for lost opportunity to earn overtime or penalty rates that an employee might have received had they been working. For example, an employee earning $1,000 per week who takes one week of annual leave would receive an additional $175 on top of their regular pay, totaling $1,175 for that week.
The inclusion of this loading aims to ensure employees are not financially disadvantaged by taking their entitled annual leave. It supports work-life balance by making it easier for employees to take time off without experiencing a significant reduction in their income. Historically, leave loading originated in Australia as a negotiated benefit for blue-collar workers, designed to offset the potential loss of overtime earnings during holiday periods. Its presence now varies depending on employment contracts, industrial awards, and enterprise agreements.
