Leave Loading

How do I set up leave loading for my employees?

Full-time and part-time permanent workers are entitled to a minimum of 4 weeks of paid annual leave for every 12 months of continuous service, based on their ordinary hours of work. Shift workers are entitled to 5 weeks of paid annual leave. 

Leave Loading:

• is an extra payment on top of an employees annual leave pay, to compensate them for expenses during annual leave.
• it is usually 17.5% of your employees normal pay.
• is paid at your employees ordinary rate of pay when an employee takes annual leave. This does not include any overtime, penalty rates, allowances or bonuses.
• you will only have to pay leave loading if it is outlined in your employee's award or workplace agreement. Visit the Fair Work Commission site for more information about an award or workplace agreement for employees or call the Fair Work Info line on 13 13 94.
• Click on the following ATO link for more information: Leave Loading 

To set up leave loading:

Step 1: Add Leave Loading as a new Pay Rate item:

• Click on the Payroll toolbar option.
• Click on the Setup Lists tab.
• Click on the Pay Rates tab.
• Click on the Add button.

• Setup Pay Item for Annual Leave Loading:
  • Name - 'Annual Leave Loading'.
  • Per - select 'Pay' from the drop down list.
  • Hrs/Units - leave blank.
  • Rate - '0.1750'. (Note: Day workers are usually entitled to a 17½% annual leave loading caluculated on the ordinary weekly rate of pay.)
  • Super - don't tick. (Click on the following ATO link for more information: Superannuation Guarantee (SG) Contributions Calculator.)
  • Taxable - tick. (Any leave loading attracted by annual leave in an advance leave payment is to be added to the total leave payment when calculating the withholding.)
  • Optional Cashbook Account - this will automatically default to Include with wages. Click on the Allocate to radio dial if you have set up another account specifcally for Leave Loading.
• Click on the OK button to save.

Here is an example of how to enter an Annual Leave pay with leave loading:

Example: Employee, John Brown, who is paid fortnightly, earns $1,000 a week ($2,000 a fortnight - 80 hours @ $25/hour) and is taking 4 weeks annual leave. He will receive a leave payment of $4000 for four weeks leave. The annual leave attracts leave loading at the rate of 17.5% per pay, which increases the total leave payment by $700 to $4,700.

Add the pay:

• Still in Payroll.
• Click on the Employees tab.
• Double click on the employee you are adding the pay for.
• Click on the Add Pay button.
• Click on the Wages/ Salary tab.
• Select Annual Leave from the Pay Type drop down list.
• Per - Pay (Annual Leave should already exist as a Pay Rate as part of your original Cashbook setup.)
• Hrs/Units - '160' (John Brown work 80 hours/fortnight, 160 hours/4 weeks)
• Rate - '25' (John Brown's normal pay rate)
• Total - will calculate at 4,000.
• Note: Super and Taxable should be ticked.
• Next line:
• Select Annual Leave Loading from the Pay Type drop-down list.
• Per - Pay (auto-fill)
• Hrs/Units - enter the Total amount of the Annual Leave.
• Rate - 0.175 (auto-fill)
• Total - will calculate to 700. 
• Note: Super should not be ticked, Taxable should be ticked. 

• Click on Summary tab.
• Click OK to save.

• Click Yes to the information message: 'Do you want to add this pay into your cashbook.'
• Click OK to record the transaction in Cashbook.
• Click on the Close button.