Casual Loading: What the 25% Really Means for Your Pay
Casual loading explained: what the 25% compensates for, how it's calculated, how it compares to permanent employment, and your right to convert.
What the 25% casual loading compensates for
The 25% casual loading is a pay premium added to the base hourly rate to compensate casual employees for the entitlements they don't receive. Specifically, the loading offsets: no paid annual leave (4 weeks for full-time), no paid personal/carer's leave (10 days per year), no paid compassionate leave (2 days per occasion), no notice of termination or redundancy pay, and the general lack of certainty about ongoing work. The idea is that the higher hourly rate makes up for these missing benefits. Whether 25% truly compensates for all of these is debatable — modelling suggests permanent entitlements can be worth 30-35% of base salary over the long term, particularly when leave loading and redundancy are factored in.
How casual loading is calculated
Casual loading is calculated on top of the minimum base rate for the relevant classification under your award. For example, if the base rate for a Level 1 Retail Employee is $25.44/hr, the casual rate is $25.44 + 25% = $31.80/hr. The loading applies to the ordinary base rate before any penalty rates are added. When penalty rates apply (e.g., Sunday work), the penalty is generally calculated on the base rate first, and then the casual loading is applied — or the award may specify a single casual penalty rate. Always check your specific award, as the calculation method can vary between awards and can significantly affect your pay.
Not all awards use 25%
While 25% is the standard casual loading under most Modern Awards, some awards and enterprise agreements have different casual loading rates. For example, certain awards in the building and construction industry may provide for a different casual loading structure that includes specific allowances. Some enterprise agreements negotiate a higher casual loading in exchange for other trade-offs. Additionally, some awards calculate the casual rate differently — instead of a simple percentage on top of the base rate, they specify separate casual rates for each classification level that may not be exactly 25% above the permanent rate. Always verify the exact casual rate in your specific award.
Cost comparison: casual vs permanent employee
For employers, the choice between casual and permanent staff involves weighing the higher hourly cost of casuals against the hidden costs of permanent employees. A permanent employee on $30/hr actually costs roughly $39-42/hr when you include 12% super, 4 weeks annual leave (7.7% of salary), 17.5% leave loading, 10 days personal leave (3.8% of salary), and workers compensation insurance. A casual on the same base rate costs $37.50/hr (with loading) plus 12% super, but with no leave liabilities and easier rostering flexibility. For short-term or irregular work, casuals are often cheaper; for consistent, ongoing roles, permanent employees usually cost less overall.
The casual conversion right
Since the Closing Loopholes Act amendments took effect in August 2024, the casual conversion framework gives employees more power. A casual employee can notify their employer that they believe their employment no longer meets the definition of casual (i.e., they have a regular pattern of work with a firm advance commitment). The employer then has 21 days to respond. For small businesses (under 15 employees), the employee pathway applies after 12 months of employment. For larger businesses, it applies after 6 months. An employer can only refuse conversion on fair and reasonable operational grounds, and must provide a written response explaining their reasons.
The Casual Employment Information Statement
Employers must provide every new casual employee with the Casual Employment Information Statement (CEIS) before or as soon as practicable after the employee starts work. This document, published by the Fair Work Ombudsman, explains what it means to be a casual employee, the casual conversion process, and the employee's rights. For existing casual employees, the CEIS must be provided at least once every 12 months. Failure to provide the CEIS is a technical breach of the Fair Work Act. The statement was updated in 2024 to reflect the new casual definition and conversion framework introduced by the Closing Loopholes Act.
Is casual loading really enough?
Financial modelling shows that over a working lifetime, the 25% casual loading may not fully compensate for lost entitlements. A permanent employee who takes 4 weeks annual leave with 17.5% leave loading, uses 5 of their 10 personal leave days, and receives redundancy pay after several years of service is getting benefits worth more than 25% of their base rate. Additionally, casual employees miss out on income certainty, career development opportunities, and — importantly — long service leave after a qualifying period. If you've been working regular, predictable hours as a casual for more than 6 months, it's worth considering whether conversion to permanent employment would leave you better off.
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Official resources
General information and estimates only — not legal, financial, or tax advice. Always verify with the Fair Work Ombudsman (13 13 94) or a qualified professional.