Guide
Is annual leave loading paid on termination in Australia?
Updated
This one has a clear answer, and it is the answer employees are most often told wrongly.
The rule
The Fair Work Ombudsman states that when employment ends, employers must pay their employee for any unused annual leave accumulated during their employment, and that the annual leave payment must be the same amount the employee would have received if they had taken the annual leave during their employment. It goes on: for example, if an employee would be entitled to annual leave loading or other payments when taking annual leave, those loadings and other payments must be included in the final payment (Fair Work Ombudsman: payment for annual leave).
A contract cannot switch it off
The same page adds that unused annual leave payments apply even if an award, enterprise agreement or employment contract says that they do not. The page cites Fair Work Act 2009 sections 16, 89(2) and 90 as its source reference.
The Fair Work Ombudsman's library article says the same thing from the loading side: when employment ends, unused accumulated annual leave is paid out as if the employee had taken the leave during employment, calculated the same way as during employment, and including any annual leave loading, penalty rates or shift loading that would have applied (Fair Work Ombudsman library).
What that means in practice
- If your award gives you 17.5% loading on leave taken, that 17.5% belongs in your termination payment too.
- If your award pays the higher of loading or penalties, the same comparison is run on the termination payment.
- If your award never gave you loading, there is no loading to pay out. The rule preserves your entitlement, it does not create one.
- A clause in a contract saying loading is not paid on termination has no effect on the statutory position.
Working out the number
Put your accrued balance into the calculator as weeks of leave, at the rate your leave would have been paid at, with your award's loading percentage. The total is what the untaken leave is worth gross, before PAYG withholding. Termination payments are withheld from under separate rules, so the net figure on your final payslip will not match this total.
| Accrued balance | Base pay | Loading at 17.5% | Total payable |
|---|---|---|---|
| 1 week | $1,330 | $233 | $1,563 |
| 4 weeks | $5,320 | $931 | $6,251 |
Both rows use this site's own calculator formulas. If your accrued balance is held in hours rather than weeks, divide by your ordinary weekly hours first.