Understanding Casual Loading in Australia

Understanding Casual Loading in Australia

Author: Megan Adams, Progressive Legal

In the dynamic world of employment, casual labour plays a significant role. Casual employees provide businesses with flexibility, but what exactly is casual loading, and how does it impact both employers and employees in Australia?

On this page, we’ll explore the ins and outs of casual loading, from its definition to casual employee benefits. 

What is casual loading?

Casual loading, in simple terms, is an additional payment made to casual employees in recognition of their lack of job security and entitlements compared to permanent employees. It compensates casual workers for not receiving benefits like paid leave, notice periods, or access to redundancy pay. 

Casual employees are often hired on an irregular basis, providing employers with the flexibility to manage their workforce as needed. This arrangement can be highly beneficial for businesses with fluctuating workloads, but it comes with specific obligations and costs. 

How much is casual loading?

What is a base wage?

A base wage is the hourly rate that you would pay a permanent employee in the casual’s position.  This could be calculated with reference to an employment contract, an award, an enterprise agreement, or the national minimum wage.

How does casual loading vary based on awards and enterprise agreements?

While we’ve discussed the standard casual loading rates in various states, it’s crucial to highlight that casual loading can indeed vary based on the specific industry or occupation.  

In Australia, many employees are covered by modern awards or enterprise agreements, which can dictate different casual loading rates. 

Modern Awards and Casual Loading

Modern awards are industry-specific legal documents that outline employment conditions, including casual loading rates. These awards are designed to ensure fair and consistent treatment of employees within particular industries.

It’s essential for employers to check the relevant modern award for their employee’s role to determine the correct casual loading rate. In some cases, modern awards may stipulate a higher or lower casual loading percentage than the standard 25%. 

Enterprise Agreements and Customised Arrangements

Enterprise agreements are negotiated agreements between employers and employees or their representatives. These agreements can also affect casual loading rates. In some cases, employers and employees may mutually agree to different casual loading rates, provided they meet or exceed the minimum requirements set by the relevant modern award or the Fair Work Act. 

It’s worth noting that any variation to casual loading rates in enterprise agreements must be carefully negotiated, and employees should not be disadvantaged in terms of overall remuneration compared to the standard rates set by the award.  The Fair Work Commission must approve all enterprise agreements to determine that they are fair to the workers. 

How to calculate casual loading

Calculating casual loading is generally a straightforward exercise.  An employer calculating casual loading should identify the employee’s base hourly rate. From there, the employer should multiply that hourly rate by the percentage of the casual loading (normally 25%). 

It is important to remember that employees receive casual loading based on their base hourly rate. So, for instance, if an employee’s base hourly rate is $20, then the casual loading would be $5 ($20 x 0.25).   

While it is tempting to refer to an employee’s hourly rate as $25, it is important to remember that their base hourly rate is $20 and their casual loading is $5, as this can reduce confusion in the future.

Overtime and casual loading

Casual loading is handled differently between different industrial instruments.

In some instruments, such as in the Meat Industry Award 2020, employees are not entitled to casual loading for any overtime worked. If an employee is on a base rate of $20 per hour: 

$20 x 1.5 = $30

In some instruments, such as the Manufacturing and Associated Industries and Occupations Award 2020, the casual loading compounds for overtime hours, so an employee earns casual loading on their overtime hours. For instance, if an employee is on a base rate of $20 per hour:

($20 x 1.5) + 25% = $37.50

Finally, in some instruments, such as the Clerks Private Sector Award 2020, casual loading is only paid on the base rate and not on the overtime rate. For instance, if an employee is on a base rate of $20 per hour:

($20 x 0.25) + ($20 x 1.5) = $35 

It is important to ensure that your employees are correctly classified and that you have familiarised yourself with the rules within each industrial instrument for overtime and casual loading.

In addition to avoiding underpayment claims or overpayment incidents, this is important because employees frequently question how their casual loading is calculated when they work overtime and it’s important to be able to articulate that clearly to them.

Casual employment obligations

As an employer, it’s crucial to be aware of your obligations when hiring casual staff. Besides paying the required casual loading, you must also provide a fair and safe working environment.  

It is best practice to clearly state in an employment contract what an employee’s base rate is as well as what their casual loading is, along with the applicable award or other industrial instrument.  This can protect you from underpayment claims in the future. For expert legal guidance and assistance in drafting employment contracts, request our advice below.

Casual employment contracts should also include offset clauses that reduce an employer’s risk of having to pay entitlements in the event an employee is found to not be a true casual employee. 

Casual employees are entitled to the same workplace rights and protections as permanent employees, such as protection from discrimination and the right to a safe workplace.

What is a casual employee and a long-term casual employee?

It’s essential to differentiate between casual employees and long-term casual employees. Casual employees typically work irregular hours and have no guarantee of ongoing employment.  

However, long-term casual employees are those who have been employed on a regular and systematic basis without becoming permanent employees. Long-term casual employees may have additional rights, including the ability to request flexible work arrangements and in some situations the right to be transitioned to permanent status.

Understanding the distinction between these two types of employees is vital for compliance with workplace laws.

What benefits do casual employees receive?

While casual employees do not receive certain benefits available to permanent employees, they do enjoy some advantages, such as: 

Flexibility

Casual employees have the flexibility to choose when and where they work, making it an attractive option for those seeking work-life balance. 

Higher hourly rates

The casual loading compensates for the lack of benefits, resulting in a higher hourly wage compared to permanent employees. 

No notice period

Casual employees can generally end their employment without notice, providing them with freedom and flexibility.  Most casual employment contracts state that the employment agreement terminates at the end of each shift.

Additional entitlements under the National Employment Standards

Casual employees derive their primary benefit from casual loading. However, they also receive various entitlements under the National Employment Standards (NES), which include: 

Casual Conversion

After 12 months, casuals may become permanent employees. 

Unpaid Leave

Casuals get 5 days of unpaid family/domestic violence leave, 2 days of unpaid carer’s leave, and 2 days of unpaid compassionate leave per situation. 

Community Service Leave

Casuals receive unpaid leave for emergency activities or jury duty.

Information Statements

Employers must provide Casual Employment and Fair Work Information Statements to casual employees to inform them of their rights and obligations under Australian labour laws. 

It’s important for both employers and employees to be aware of these entitlements, as they ensure that casual employees are treated fairly and in accordance with Australian employment standards.  

Employers should also stay informed about any changes to these entitlements, as employment laws can evolve over time.

Key Takeaways 

Casual loading is a crucial element of employment in Australia, providing compensation to casual workers for the lack of job security and entitlements. Employers must understand their obligations, calculate casual loading accurately, and treat all employees fairly and equitably. 

If you have any questions or require legal guidance regarding casual loading or any other employment-related matters, our experienced workplace lawyers at Progressive Legal are here to assist you.  

Request our advice today to discuss your specific needs and ensure your business remains compliant with the ever-evolving employment landscape in Australia.

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