Annual leave loading is an additional payment made when an employee takes annual leave, on top of their normal pay for that period. It originated to compensate for overtime and penalty payments that would have been earned had the employee been at work.
Where the obligation comes from
It is not a National Employment Standards entitlement. It arises from the applicable modern award, an enterprise agreement, or the employment contract. This means whether it is owed depends entirely on which instrument covers the role, and two employees at the same company can be treated differently.
- Commonly set at a percentage of ordinary earnings for the leave period
- Some instruments pay the loading or relevant penalty rates, whichever is greater
- Usually payable on termination for accrued but untaken leave, where the instrument provides for it
Why it matters when hiring internationally
Leave loading is easy to miss because it is invisible until someone takes leave, and it does not exist in most other countries. It also affects termination payouts, so an underpayment compounds quietly across the employment and surfaces at exit. Determining award coverage correctly is what makes the answer knowable.