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Your question answered: Can annual leave loading be set-off in an annualised salary?


If we pay above the award rate, can we absorb annual leave loading into the annualised salary?

If yes, does this need to be documented in the employee’s letter of offer? Is there specific wording that needs to be used in their letter of offer to accommodate this change.



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.

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.