What is Leave Loading?

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Leave loading is a difficult concept and even harder to implement correctly in a business

Most Modern Awards give award-covered employees the right to have leave loading added to their annual leave when taken.

Non-award-covered employees do not have a right by law to have leave loading added to their pay when taking annual leave unless their employment contract states that leave loading will be added to the employee’s pay when leave is taken.

Leave loading is an extra payment given on top of annual leave pay and is usually around 17.5% extra pay on top of an employee’s annual leave pay. It was implemented for the purposes of compensating workers for extra expenses incurred during leave.

Not all modern awards give rise to leave loading. It is, therefore, necessary to know if your employees are covered by the modern award. Contact HR/IR Solutions your off-site human resources consultant in Wollongong and Illawarra for help to determine if leave loading is payable for your business award-covered employees.

If employees are paid above the modern award rate of pay HR/IR Solutions can draft an offset agreement that factors leave loading into the weekly or hourly rate of pay. This means that leave loading is not payable when annual leave is taken or paid out.

Another complication is whether or not superannuation is required to be paid by employers for a leave loading. Generally, employers will be required to pay superannuation on leave loading. Should the employer decide that the leave loading is compensation for overtime wages that the employee could have earned during leave, the superannuation does not need to be paid on the overtime component of the annual leave. This is a complex issue and if done incorrectly, will result in a fine from the ATO for withheld super contributions.

On termination or resignation, the employer will in certain circumstances include leave loading in the calculation of the final payment. Only annual leave in excess of 20 accrued days attracts leave loading when employees resign or are terminated. Usually leave that accrued in the current year of employment (less than 20 accrued days of leave) does not attack leave loading.

HR/IR Solutions can help businesses in Wollongong and The Illawarra as their on-site or off-site Human Resources specialists. We are available to solve tricky and complex HR and Industrial Relations problems.

Call John on 0407 069 507

Visit: HRIRsolutions.com.au

Email: john@HRIRSolutions.com.au

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