Casual Loading

What is casual loading?

Casual loading is an extra payment—typically around 25%—added to the base pay of casual employees. It’s meant to compensate for not receiving certain National Employment Standards (NES) entitlements, such as annual leave, personal/carer’s leave, notice periods, and redundancy pay.

Since casual workers don’t have the same job security or benefits as permanent staff, this higher hourly rate helps balance out those missing entitlements.

How does casual loading work?

Casual loading is usually a set percentage—commonly 25%—added to a casual employee’s base hourly rate. The exact rate depends on the applicable award, enterprise agreement, or employment contract. It only applies to hours worked and doesn’t accrue like leave entitlements.

Instead of paid holidays or personal leave, casual workers are paid more upfront. If a casual employee moves to a permanent role, the loading is removed, and they gain access to standard leave benefits and greater job security.

The Fair Work Act 2009 regulates casual loading by outlining its purpose, how it’s applied, and what it means for employment relationships. Below are the key aspects of the Act employers should know:

• Definition of casual employment: Under Section 15A of the Fair Work Act, an employee is considered casual if there is no firm commitment to ongoing, indefinite work. This is assessed based on the actual nature of the work, not just what’s written in the contract.
• Offsetting NES claims: Regulation 2.03A of the Fair Work Regulations 2009 allows employers to offset casual loading against claims for NES entitlements—such as annual leave—if an employee was incorrectly classified as casual but later found to be permanent. This is to avoid double-dipping (receiving both casual loading and permanent entitlements).
• Clear documentation required: For this offset to apply, the casual loading must be clearly identified in writing—such as in the employment contract or on payslips.
• Casual conversion rights: The Fair Work Act gives casual employees the right to request conversion to permanent status if they’ve been working a regular pattern of hours for at least 12 months. However, their prior service as a casual doesn’t count toward entitlements like redundancy pay or notice periods.
• National consistency: Casual loading rules are consistent across all states and territories in Australia due to national workplace laws under the Fair Work Act 2009. This means the same rules apply for employees in New South Wales, Victoria, Queensland, Western Australia, South Australia, Tasmania, the Northern Territory, or the Australian Capital Territory.
• Award and agreement variations: While the general rules are national, the exact casual loading percentage and conditions may vary depending on the applicable award or enterprise agreement. For example, casual rates in hospitality, retail, or construction awards may differ.
• Western Australia exception: Most employees in WA fall under the national system, but some—such as those employed by sole traders or partnerships not considered ‘constitutional corporations’—are covered by the state industrial relations system. These arrangements may use state-based awards, though the approach to casual loading is broadly similar.
• State government employees: Some state government workers may be covered by state-specific agreements instead of the Fair Work system, which can affect how casual loading is applied.

Is casual loading mandatory?

Yes, casual loading is mandatory in Australia. Employers must pay it to all workers legally classified as casual under Australian employment law, regardless of how regularly they work. The loading—usually 25%—must be built into a casual employee’s wages to meet legal requirements under the Fair Work Act and relevant awards or agreements.

Employers also have a few other key responsibilities when hiring casual staff:

• Minimum engagement periods: While casuals don’t have guaranteed hours, many modern awards and enterprise agreements require a minimum number of paid hours per shift—even if the employee works less. Employers should check the applicable award to stay compliant.
• Leave entitlements: Casual employees generally do not accrue paid leave like annual or sick leave but are entitled to certain unpaid leave, including carer’s leave and compassionate leave. In some states or territories, they may also qualify for long service leave.
• Termination notice: Employers generally don’t need to notify casual employees before termination. However, some awards, agreements, or contracts might include specific requirements, so it’s important for employers to check those details.
• Casual conversion: Under the Fair Work Act, casual employees who’ve worked regular and predictable hours for at least 12 months may be eligible to convert to permanent (part-time or full-time) status. Employers are required to inform eligible employees of their conversion rights and, in some cases, must offer conversion if the employee meets the criteria.

HR tip

Build casual conversion into your workforce planning: Set up periodic reviews (e.g., every 6 or 12 months) to assess if casual employees are working consistent, predictable hours that might make them eligible for permanent conversion. Managers can help track regular work hours and communicate with employees about potential transitions, ensuring a smooth process that aligns with business needs.

How to calculate casual loading

Casual loading is calculated by adding a percentage to a casual employee’s base hourly rate to compensate for the lack of paid leave and other entitlements that permanent employees receive. In Australia, the standard casual loading rate is 25%, though it can vary depending on the relevant award, enterprise agreement, or employment contract.

Calculation steps

1. Identify the base hourly rate for the permanent employee in the same role.
2. Determine the casual loading percentage, which is typically 25% but may vary depending on the relevant award or agreement.
3. Multiply the base hourly rate by the loading percentage.
4. Add that amount to the base rate to get the total casual hourly rate.

Here’s a calculation example using the current national minimum wage:

$21.38 (base rate) + $5.35 (25% loading) = $26.73 per hour

So, a casual employee on the minimum wage would earn $26.73 per hour.

Do casual employees earn penalty rates and overtime?

Yes, casual employees are generally entitled to penalty rates for working weekends, public holidays, or outside standard hours—just like part-time and full-time staff. However, how casual loading interacts with overtime depends on the specific industry award or enterprise agreement.

For example, a casual employee working on a public holiday may be entitled to 250% of their base hourly rate, which includes casual loading.

The Fair Work Commission outlines three different methods for calculating casual overtime across awards:

• Substitution approach: The overtime penalty rate replaces the casual loading. So, instead of getting both, the employee is paid only the overtime rate.
• Cumulative approach: Casual loading and overtime penalty rates are applied separately to the minimum hourly rate, with both amounts added together.
• Compounding approach: The overtime penalty is applied on top of the casual rate (which already includes loading), resulting in a higher total payment.

Employers must accurately calculate entitlements for fair and lawful compensation, which means checking the relevant award, determining the approach for casual employees, and ensuring correct wage calculations and compliance with Fair Work requirements.

HR tip

Automate payroll and compliance checks: Use HR and payroll software that automatically calculates casual loading, penalty rates, and overtime based on the relevant award or agreement. Regular payroll audits are also a smart move—they help catch errors early, ensure compliance with Fair Work requirements, and reduce the risk of underpayments.

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