Where does the 17.5% come from?
Leave loading dates from an era when overtime and shift penalties made up a large share of take-home pay. An employee on leave earned only their base rate, so awards added a loading to stop a holiday being a pay cut. The 17.5% figure became the common standard across awards and has carried through to today, even for salaried employees who never work penalty shifts.
Who is entitled to leave loading?
It is not a universal entitlement. The National Employment Standards guarantee four weeks of paid annual leave but say nothing about loading; the entitlement comes from the applicable modern award, enterprise agreement or employment contract. Many award-covered employees receive it, many salaried professionals do not, and some awards pay shift workers the greater of the loading or the weekend penalties they would have earned.
How is leave loading calculated?
Multiply the leave pay by the loading percentage. An employee on a $90,000 salary taking their four weeks of annual leave earns about $6,923 in leave pay, so a 17.5% loading adds roughly $1,212 for the year. Loading is taxed as ordinary income and, where it is payable on leave, it is generally also payable on unused annual leave paid out at termination.
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