What Is Casual Loading and How to Calculate It
Casual loading is a percentage added to the base hourly rate of casual employees to compensate them for the leave entitlements and other benefits they miss out on compared to permanent staff. Under almost every Modern Award in Australia, the casual loading is 25%.
It sounds simple. Base rate plus 25% equals casual rate. But in practice, casual loading is one of the most frequently miscalculated components of Australian payroll. Employers either double-dip by adding loading on top of penalty rates, apply the loading incorrectly to overtime, or misunderstand what the loading is supposed to cover.
This guide covers everything you need to know about casual loading: what it is, how to calculate it, how it interacts with penalty rates and overtime, and the mistakes that lead to underpayments or overpayments.
What Casual Loading Compensates For
The 25% casual loading is not arbitrary. It was calculated by the Australian Industrial Relations Commission (now the Fair Work Commission) to approximate the monetary value of the entitlements that casual employees do not receive:
- Paid annual leave: 4 weeks per year (equivalent to approximately 7.7% of wages)
- Paid personal/carer's leave: 10 days per year (equivalent to approximately 3.8% of wages)
- Paid public holidays: approximately 8-12 days per year where a permanent employee is paid but does not work (equivalent to approximately 3-4.6% of wages)
- Notice of termination: 1-5 weeks depending on service
- Redundancy pay: 4-16 weeks depending on service
The 25% figure has been in place since the award modernisation process in 2010 and has been affirmed in multiple FWC decisions. Some enterprise agreements set a different loading (occasionally 20% or even 30%), but the standard under all 155 Modern Awards is 25%.
The Basic Calculation
The formula for calculating the casual hourly rate is:
Casual hourly rate = Base hourly rate x 1.25
The base hourly rate is the minimum hourly rate for the relevant classification level under the applicable Modern Award for full-time or part-time employees. It is found in the FWC's pay guide for the award or calculated by dividing the weekly rate by 38.
Worked Example: Hospitality Award Level 1
Under the Hospitality Industry (General) Award 2020 (MA000009), the Level 1 base rates effective 1 July 2025 are:
- Weekly rate: $882.80
- Hourly rate: $882.80 / 38 = $23.23
The casual hourly rate for ordinary weekday hours is:
$23.23 x 1.25 = $29.04 per hour
This $29.04 applies to ordinary hours worked during the award's ordinary hours span (7am to midnight for the Hospitality Award) on Monday to Friday.
Worked Example: Clerks Award Level 2
Under the Clerks — Private Sector Award 2020 (MA000002), the Level 2 base rates are:
- Weekly rate: $918.00
- Hourly rate: $918.00 / 38 = $24.16
The casual hourly rate for ordinary weekday hours is:
$24.16 x 1.25 = $30.20 per hour
Worked Example: General Retail Industry Award Level 3
Under the General Retail Industry Award 2020 (MA000004), the Level 3 base rates are:
- Weekly rate: $937.80
- Hourly rate: $937.80 / 38 = $24.68
The casual hourly rate for ordinary weekday hours is:
$24.68 x 1.25 = $30.85 per hour
How Casual Loading Interacts with Penalty Rates
This is where the majority of payroll errors occur. The critical rule is:
Casual penalty rates published by the Fair Work Commission are flat multipliers that already include the 25% casual loading. You do not add loading on top of a penalty rate.
Here is how it works, using the Hospitality Award as an example:
| When | Permanent Multiplier | Casual Multiplier | Casual Rate (Level 1) |
|---|---|---|---|
| Weekday ordinary hours | 100% | 125% | $23.23 x 1.25 = $29.04 |
| Saturday | 125% | 150% | $23.23 x 1.50 = $34.85 |
| Sunday | 150% | 175% | $23.23 x 1.75 = $40.65 |
| Public holiday | 225% | 250% | $23.23 x 2.50 = $58.08 |
Notice the pattern. The casual multiplier is always 25 percentage points higher than the permanent multiplier. That gap is the casual loading, built into the flat rate.
The Most Common Mistake
The most common error is calculating casual penalty rates like this:
Base rate x casual loading x penalty rate $23.23 x 1.25 x 1.25 (Saturday) = $36.30
This is wrong. It applies the 25% loading twice — once as the casual loading, and once as part of the Saturday penalty calculation. The correct calculation is:
Base rate x casual Saturday multiplier $23.23 x 1.50 = $34.85
The difference is $1.45 per hour. Over a year of Saturday shifts, this error would result in an overpayment of hundreds of dollars per employee. While overpayment is not illegal, it is costly and becomes a headache if you try to correct it later.
Going the Other Direction
The reverse error — paying the permanent penalty rate to casuals — is far worse. Some employers pay casuals the permanent Saturday rate of 125% ($29.04) instead of the casual Saturday rate of 150% ($34.85). This is an underpayment of $5.81 per hour, which is a contravention of the Fair Work Act and can trigger penalties, back-payment orders, and (since 1 January 2025) criminal prosecution for intentional underpayment.
How Casual Loading Interacts with Overtime
Casual overtime is treated differently from casual penalty rates, and the rules vary between awards.
General rule: Where an award provides for casual overtime, the overtime rate is calculated on the base rate (not the casual-loaded rate). The casual loading is not added on top of overtime rates.
Here is how it works under the Hospitality Award:
| Overtime Period | Multiplier of Base Rate | Level 1 Rate |
|---|---|---|
| First 2 hours overtime (Mon-Fri) | 150% | $23.23 x 1.50 = $34.85 |
| After 2 hours overtime (Mon-Fri) | 200% | $23.23 x 2.00 = $46.46 |
| Sunday overtime | 200% | $23.23 x 2.00 = $46.46 |
| Public holiday overtime | 250% | $23.23 x 2.50 = $58.08 |
Notice that casual overtime rates do not have the 25% loading added. The Hospitality Award explicitly states that casual overtime is calculated on the base rate (clause 33.3).
But not all awards provide casual overtime at all. The General Retail Industry Award (MA000004) and the Clerks Award (MA000002) do not have separate casual overtime provisions. Under these awards, casuals receive their loaded penalty rates only, with no overtime multiplier on top.
Key question to ask for any award: Does this award provide for casual overtime? If yes, is it calculated on the base rate or the loaded rate? The answer is almost always the base rate, but check the specific clause.
Casual Loading and Superannuation
Casual loading is considered ordinary time earnings (OTE) for superannuation purposes. This means the employer must calculate superannuation on the total casual hourly rate, including the loading.
For a Level 1 casual under the Hospitality Award:
- Casual hourly rate: $29.04
- Superannuation rate (2025-26): 11.5%
- Super per hour: $29.04 x 11.5% = $3.34
For a permanent employee at the same level:
- Hourly rate: $23.23
- Super per hour: $23.23 x 11.5% = $2.67
The employer pays $0.67 more per hour in super for the casual employee, simply because of the casual loading being included in the OTE calculation.
Over a 20-hour week and 52-week year, that is an additional $696.80 in superannuation costs for the casual compared to a part-timer doing the same hours.
Does Casual Loading Apply to All Hours?
Yes, casual loading applies to all ordinary hours worked by a casual employee. There is no cap and no threshold. Whether a casual works 2 hours or 38 hours in a week, every ordinary hour attracts the 25% loading (as built into the flat casual rate).
However, as noted above, overtime hours are generally calculated on the base rate without the loading. So while ordinary hours always include the loading, overtime hours typically do not.
Can Casual Loading Be Offset Against Other Payments?
In some circumstances, yes. The concept of "offsetting" arises when an employer pays a casual a flat hourly rate above the award rate and argues that the higher rate covers both the casual loading and any applicable penalty rates.
However, this is risky. The FWC and the Federal Court have held that a flat rate can only offset award entitlements if:
- The employment contract clearly identifies which entitlements the higher rate is intended to cover
- The higher rate is sufficient to cover all entitlements that would otherwise be payable
- The employer can demonstrate, on a pay-period-by-pay-period basis, that the employee was not worse off
Simply paying above-award rates without specifying what the higher rate covers does not create a valid offset. The leading case is Poletti v Ecob (No 2) [1989] FCA 364, and the principle has been affirmed in numerous subsequent decisions.
Casual Loading Under Enterprise Agreements
If your business has an enterprise agreement, the casual loading may be different from the standard 25%. Some enterprise agreements set the loading at 20%, 22%, or even 30%. The agreement must have passed the Better Off Overall Test (BOOT) at the time of approval, but the specific loading percentage can vary.
If you operate under an enterprise agreement, check the casual employment clause for the applicable loading rate. Do not assume it is 25%.
Changes Under the Closing Loopholes Act
The Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 made significant changes to casual employment, but it did not change the casual loading rate. The 25% loading remains standard under all Modern Awards.
What the Closing Loopholes Act did change:
Definition of casual employee: The new definition focuses on whether there is a "firm advance commitment to continuing and indefinite work according to an agreed pattern of work." The practical effect is that an employee can be casual even if they work regular hours, provided the contract does not contain a firm advance commitment.
Casual conversion: Conversion is now employee-initiated. An eligible casual can give written notification of conversion, and the employer can only refuse on specified grounds.
Casual loading offset: If a casual converts to permanent employment and subsequently claims back-payment for leave entitlements during the casual period, the employer can offset the casual loading already paid against any such claim (section 545A of the Fair Work Act). This prevents "double-dipping" by the employee.
These changes affect the mechanics of casual employment but not the loading calculation itself.
Step-by-Step: Calculating a Casual Employee's Pay for a Full Week
Let us work through a complete example.
Employee: Level 1 casual under the Hospitality Award (MA000009) Base hourly rate: $23.23 Hours worked:
- Monday: 5 hours (11am to 4pm)
- Wednesday: 6 hours (4pm to 10pm)
- Saturday: 8 hours (10am to 6pm)
- Sunday: 4 hours (10am to 2pm)
Calculation:
| Day | Hours | Multiplier | Rate | Total |
|---|---|---|---|---|
| Monday | 5 | 125% (casual ordinary) | $29.04 | $145.20 |
| Wednesday | 6 | 125% (casual ordinary) | $29.04 | $174.24 |
| Saturday | 8 | 150% (casual Saturday) | $34.85 | $278.80 |
| Sunday | 4 | 175% (casual Sunday) | $40.65 | $162.60 |
| Total | 23 | $760.84 |
Plus superannuation: $760.84 x 11.5% = $87.50
Total cost to employer: $760.84 + $87.50 = $848.34
If this employee were part-time, the calculation would be:
| Day | Hours | Multiplier | Rate | Total |
|---|---|---|---|---|
| Monday | 5 | 100% | $23.23 | $116.15 |
| Wednesday | 6 | 100% | $23.23 | $139.38 |
| Saturday | 8 | 125% | $29.04 | $232.32 |
| Sunday | 4 | 150% | $34.85 | $139.40 |
| Total | 23 | $627.25 |
Plus superannuation: $627.25 x 11.5% = $72.13
Total cost to employer (before leave accrual): $627.25 + $72.13 = $699.38
Difference in this week: $848.34 - $699.38 = $148.96 more for the casual
But the part-timer is also accruing 3.5 hours of annual leave and 1.8 hours of personal leave this week, which represents a future cost.
Frequently Asked Questions
Is casual loading always 25%?
Under all 155 Modern Awards, yes. The standard casual loading is 25% of the base hourly rate. Some enterprise agreements set a different rate, but this is uncommon and must pass the BOOT.
Do you calculate casual loading on the base rate or the award rate?
They are the same thing. The "base rate" and the "award rate" for a classification level both refer to the minimum hourly rate for permanent (full-time or part-time) employees. The casual loading of 25% is applied to this rate.
Does casual loading apply on public holidays?
The casual loading is built into the casual public holiday multiplier. Under most awards, the casual public holiday rate is 250% (permanent rate of 225% plus 25% loading). You do not add an additional 25% on top of the 250%.
Is casual loading taxable?
Yes. Casual loading is part of the employee's gross earnings and is subject to PAYG withholding tax in the same way as any other wage payment. It is not a separate allowance — it is built into the hourly rate.
Can an employer pay more than 25% casual loading?
Yes. The 25% is the minimum. An employer can choose to pay a higher loading. However, if the higher rate is intended to cover penalty rates or overtime as well, this must be clearly documented and reconciled.
What happens to casual loading when an employee converts to part-time?
The casual loading ceases from the date of conversion. The employee moves to the base hourly rate (without the 25%) and begins accruing leave entitlements. There is no "transition period" — the change takes effect on the conversion date.
Does casual loading count towards the high income threshold?
Yes. The high income threshold (currently $167,500 per year) for unfair dismissal purposes includes all earnings, including casual loading. A casual earning a loaded rate that results in annualised earnings above this threshold may be excluded from unfair dismissal protections (subject to award coverage).
Calculate casual loading and penalty rates for any award with AirComply — enter the award name, classification level, and day of the week to see the exact casual rate with loading already applied.