Leave loading is a loading, typically 17.5%, paid to employees when they take annual leave. It aims to compensate for lost opportunity to earn overtime or penalty rates that an employee might have otherwise worked during that period. As an example, if an employee’s usual weekly wage is $1000, their leave loading entitlement for one week of annual leave would be $175 (17.5% of $1000), bringing their total payment for that week to $1175.
The introduction of this loading was historically intended to ensure that employees weren’t financially disadvantaged by taking holidays, promoting work-life balance and encouraging rest. The benefit lies in providing additional income specifically during vacation time, which can be used for leisure activities or travel, leading to improved employee morale and reduced burnout. This financial support acknowledges the potential loss of additional earnings and acknowledges the importance of breaks from work.
