What Is Holiday Loading?

Holiday loading — also called annual leave loading — is an additional payment employers make to employees when they take paid annual leave. The concept exists under Australia's Fair Work system and appears in most modern awards.

The purpose of holiday loading is to compensate employees for the loss of overtime or penalty rates they would have earned if they had worked instead of taking leave. It ensures workers are not financially disadvantaged by taking time off.

In FY 2025-26, the standard rate across most awards remains 17.5% of the employee's base rate of pay. However, some enterprise agreements specify a fixed dollar amount or a different percentage.

Who Is Entitled to Holiday Loading?

Not every employee receives holiday loading. Eligibility depends on the industrial instrument that covers your employment.

Award-covered employees are the most common group entitled to holiday loading. The majority of modern awards under the Fair Work Act 2009 include an annual leave loading clause. Common examples include the Clerks Award, Hospitality Award, Retail Award, and Manufacturing Award.

Employees on enterprise agreements may also receive holiday loading, but the rate and conditions can differ from the award standard. Always check your specific agreement for the exact clause.

Employees who are award-free (not covered by any award or agreement) generally do not have an automatic entitlement to holiday loading. The National Employment Standards (NES) only guarantee four weeks of paid annual leave at the base rate — not loading.

How to Calculate Holiday Loading

The calculation is straightforward. You multiply the base hourly rate by 1.175 (for 17.5% loading) and then by the number of hours of annual leave taken.

Here is the formula:

Holiday Loading Amount = Base Hourly Rate × 0.175 × Hours of Annual Leave Taken

Your total pay for the leave period is:

Total Leave Pay = (Base Hourly Rate × Leave Hours) + Loading Amount

Example Calculation

Sarah is a retail assistant covered by the General Retail Industry Award. Her base hourly rate is $28.50. She takes one week of annual leave (38 hours).

Tax Treatment of Holiday Loading

The ATO treats holiday loading as ordinary earnings for tax purposes. This means it is subject to PAYG withholding, just like your regular salary or wages.

Your employer withholds tax from the total leave payment (base pay plus loading) based on your tax file number declaration and the ATO withholding schedules. The amount appears on your annual payment summary (or Single Touch Payroll data).

Holiday loading also counts as Ordinary Time Earnings (OTE) for Superannuation Guarantee purposes. Your employer must pay the superannuation guarantee (12% in FY 2025-26) on the loading amount as well as the base pay.

To estimate your overall tax position including holiday loading, use our take-home pay calculator to see how additional payments affect your net income.

Common Award Rates for Holiday Loading (FY 2025-26)

The table below shows holiday loading rates under common modern awards. These rates are current for FY 2025-26.

Does Holiday Loading Affect Other Entitlements?

Yes, holiday loading interacts with several other employment and tax obligations. Understanding these connections helps you plan your finances.

Superannuation. As mentioned above, holiday loading is OTE. Your employer must pay the SGC rate of 12% on the loading. The total super contribution on the leave period equals 12% of your total leave pay (base + loading). Use our superannuation calculator to forecast your super balance including loading amounts.

Medicare Levy. Holiday loading increases your gross income, which may push you closer to or above the Medicare Levy thresholds. If your total income exceeds $27,222 (FY 2025-26), you pay the 2% Medicare Levy on your entire taxable income.

HECS-HELP Repayments. If you have a HECS-HELP debt, holiday loading counts toward your repayment income (RI). Higher annual income from loading could increase your compulsory repayment amount starting from $67,000 in FY 2025-26.

Income Tax Brackets. Your total annual income including holiday loading determines which tax bracket applies. Even a modest amount of loading could push a portion of your income into the next bracket.

Holiday Loading vs Penalty Rates

Holiday loading and penalty rates are separate concepts. Holiday loading applies when you take annual leave. Penalty rates apply when you actually work at unsociable hours.

You cannot receive both holiday loading and penalty rates for the same hours. When you are on annual leave, you are not working — so penalty rates do not apply. The loading compensates you for the penalty pay you would have earned if you had been working.

Some enterprise agreements offer a higher base rate of pay that "absorbs" the holiday loading. This is called an "all-inclusive" rate. In these cases, your regular hourly rate already factors in the loading, so you do not receive an additional 17.5% on top when taking leave.

How to Check Your Holiday Loading Entitlement

Follow these steps to confirm your holiday loading entitlement:

1. Identify your award. Check your employment contract or ask your HR department which award covers your role. You can also search the Fair Work Ombudsman website using your job title and industry.

2. Read the annual leave clause. Find the clause in your award about annual leave loading. It is usually in a section titled "Annual Leave" or "Leave Loading."

3. Check your enterprise agreement. If your workplace has an enterprise agreement, that agreement's terms override the award. Compare the loading rate in the agreement with the award rate.

4. Review your payslip. When you take annual leave, check your payslip for a separate line item showing "Leave Loading" or "Annual Leave Loading." If it is missing, you may be underpaid.

Frequently Asked Questions

Is holiday loading paid on unused leave when I resign?

Yes. When your employment ends, you are entitled to be paid out any accrued but unused annual leave. This payout must include holiday loading if you would have received it had you taken the leave. The same 17.5% loading applies to the unused leave balance.

Does holiday loading apply to part-time and casual employees?

Part-time employees receive holiday loading in the same way as full-time employees, prorated for their hours. Casual employees do not receive paid annual leave (they receive a casual loading instead), so they do not get holiday loading. However, if a casual employee converts to permanent employment, they become entitled to annual leave and holiday loading.

Is holiday loading taxed differently from regular pay?

No. Holiday loading is taxed as ordinary earnings under PAYG withholding. It is not considered a "bonus" or "lump sum" for tax purposes. Your employer withholds tax at your marginal rate based on the ATO withholding schedules. The loading appears in your STP data as part of your gross wages.

Can my employer pay me a higher base rate instead of holiday loading?

Yes, some enterprise agreements use an "all-inclusive" or "loaded" rate that already accounts for holiday loading, penalty rates, and other entitlements. This is legal as long as the overall package meets or exceeds the award minimums. Check with Fair Work or a workplace advisor if you are unsure.

What happens if my enterprise agreement does not mention holiday loading?

If your enterprise agreement is silent on holiday loading, the underlying award applies by default. You are entitled to the loading rate specified in your award. If you are award-free and no agreement clause exists, you do not have a legal entitlement to holiday loading beyond your base rate of pay.