Home - Can annual leave loading be absorbed into the employee’s annualised salary?
March 06, 2020 on chapter Annual leave

If we pay above the award rate, can we absorb annual leave loading into the employee’s annualised salary? If yes, does this need to be documented in their letter of offer?

As a general proposition, yes, annual leave loading can be set-off in an annualised salary. This should be carefully documented in the employment agreement under a set-off/compensated entitlements clause. While we are unable to provide specific legal advice, a set-off clause should generally cover all entitlements, e.g. overtime, allowances, loadings and penalties. If you include a set-off clause, you should also ensure your employees are being paid for at least the amount they would have been paid if they were being paid award rates. You also need to check whether you are complying with any award provision regarding annualised wages.

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