What is Annual Leave Loading

What is annual leave loading? Annual leave loading is a payment made to employees and their annual leave entitlement. The amount of the loading is usually a percentage of the employee’s annual salary. It is intended to compensate employees for the loss of income they suffer when they take annual leave.

Many employers offer annual leave loading to encourage employees to take annual leave. It is also a way of recognizing employees’ contributions to the business. Annual leave loading is a tax-free benefit, so employees can receive it without paying any income tax or national insurance contributions.

Employees who are covered by a collective agreement may be entitled to annual leave loading even if their employer does not offer it.

Some employee entitlements, such as annual leave loading, aren’t legally enforceable. But not all types of contractual entitlement are unenforceable. For example, most employees have a legal right to annual leave and can take it without getting their employer’s permission. Employees who don’t earn commission and aren’t on fixed-term contracts and who don’t have annual leave loading in their contract can still ask their employer for annual leave loading. Their employer doesn’t have to agree, but they can’t refuse without a good reason.

If you’re an employee and you’re not sure whether you’re entitled to annual leave loading, you should speak to your trade union representative or employment lawyer.

The Commonwealth has introduced annual leave loading for employees on $75,000 or more wages. It was phased in over six years starting from 1st January 2012 and is now fully implemented. The annual leave loading percentage is 17.5%.

Annual leave loading came about because it had been found that some employers were required to provide annual leave to employees who weren’t annual-leave-entitled under the annual leave provisions of the Fair Work Act 2009. It was determined that an annual leave loading amount was required in order for annual leave-eligible employees to have a level playing field with their non-annual-leave-eligible colleagues. Because annual leave is paid at the ordinary annual rate, annual leave-eligible employees issued with the same annual leave loading as annual leave-entitled employees will receive equitable pay for annual leave.