What is leave loading and how does it work?

author-avatar By on January 14, 2020
What is leave loading and how does it work?

Photo by Chen Mizrach on Unsplash

Leave loading sounds like the agony you feel waiting for enough leave to accrue before you can jet off to Thailand, but it’s actually much cooler than that.

While not everyone has access to it, leave loading can be a handy top-up and incentive to use up all your leave throughout the year. All full-time workers in Australia are entitled to four weeks' (or 20 business days) annual leave per year, to be paid at their usual daily rate. However, some companies add a little bit on top of that. Read on to find out more about leave loading and how it works.

What is leave loading and how is it calculated?

Leave loading is an extra payment - usually calculated at 17.5% - on top of your normal wage while taking leave. It is most common in industry award-salaried jobs throughout Australia, but still, not everyone is entitled to it. Be sure to check with your employer to see if you are eligible - chances are if you are on an enterprise agreement then you may not be, but it can pay to check anyway.

Who is entitled to leave loading?

Usually, leave loading applies to those on an award agreement. An award agreement is a legal document setting out minimum rates of pay for a particular industry. According to Fair Work Australia, there are more than 100 industry or occupation awards. These cover everything from construction to clerical work, journalism and hospitality workers.

How do I get leave loading?

If your position receives leave loading, it will be added onto your regular wage. However, the method in which it delivers varies by employer/organisation. It may be paid before, during or after your time away, either as part of your pay or as a separate sum.

If you have taken leave, it pays to check your next payslip to see how it’s broken down. In some cases, it may be pooled together at the end of a certain period and delivered to you in one sum, even if you have taken multiple trips in that time frame.

What should I do with my leave loading?

It’s all too easy to take a trip, check your payslip, see that you’ve got some leave loading on top of your regular wage and chalk it up as a win. However, if you are savvy you can take that money and use it in a variety of productive ways. Some ways could include:

Of course, we’re all about saving at savings.com.au, but no matter how you decide to stash that leave loading sum, it pays to do your research and find out what method is right for you.

Provider
Total interest
rate p.a.
Base interest
rate p.a.
Bonus interest
rate p.a.
 
Fast Track Saver
1.65% 0.20% 1.45% Go to site
1.75% 0.25% 1.50% More details
1.75% 0.15% 1.60% More details
1.70% 0.25% 1.45% More details

*Data accurate as at 01 August 2020. Rates based on a savings balance of $10,000. Introductory bonus interest rate products not included. Sorted by total interest rates. Refer to providers' websites for bonus rate conditions.

Case Study

Lee Villowdin is a public servant in Queensland and ordinarily receives $1,000 gross per week. She takes a week of leave to visit her pen pal in Casablanca - that’s a long way to go for a week, Lee!

In her week of leave, she gets 17.5% on top of her usual wage ($1,175 in total), thanks to leave loading. Being on $52,000 a year places her in the 32.5% marginal tax bracket.

  • This means that on $1,000 per week, she’d receive $818 after tax, while with leave loading she earns $932 - a difference of $114.

Now, that may not seem like much, but Lee adds that to her savings account because she’s saving for her next trip to Morocco, rather than squandering the leave loading on wine and cheese.

This graph is indicative only, and doesn’t take into account your own financial circumstances. Check with your employer and your award to find out what you can expect when you take leave.

Do you get leave loading as a payout when you leave your job?

By law, when your current employment comes to an end, your employer is required to pay out the balance of any unused leave. Historically, leave loading was not part of this equation, however according to the Fair Work Act of 2009, leave loading should now be paid out, as the provision states that if an employee is terminated they must be paid out what they would have been paid had they taken leave while employed. To be sure, check with your employer and your relevant award.

Saving.com.au’s two cents

Leave loading can certainly be a handy top-up, and a strong incentive to take your leave. There is a chance it may equate to a couple hundred dollars on top of your wage, even if you only take a week of leave. This all depends on your wage of course, and various other factors such as how much you are taxed, including degree repayments (HELP/HECS), the Medicare levy and more. It pays to check with your employer and award with what you can expect when it comes to leave loading.

Of course, with an employer, there’s a lot more to consider than just leave loading - your wage is a big one, along with other benefits professionally, financially and culturally.


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author-avatar
Harrison joined Savings in 2020. He is a journalist with more than four years of experience, with previous stints at News Corp and financial comparison site Canstar. With a keen interest in personal finance, Harrison is passionate about helping consumers make more informed financial decisions.

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