Casual loading refers to payments made to staff employed on a casual basis in lieu of leave entitlements and job security. Generally, casual loading is 15-25% of the hourly rate paid to permanent employees.
What is casual employment?
A casual employee:
- has no firm commitment about the duration of their employment or the days or hours they will work;
- has no sick or annual leave entitlements;
- can end their employment without notice unless notice is required by a registered agreement, award or contract.
In contrast, full-time or part-time employees have secure, ongoing employment and can expect to work regular hours each week. They are entitled to sick leave and annual leave, and must give or receive notice to end employment.
Casual employment is chosen by employers and employees for many reasons, including:
- it can provide “back-up” staff for a business during busy periods or staff shortages;
- it can be well suited to certain sectors such as hospitality, accommodation and agriculture, where short shifts may be needed or where there are seasonal fluctuations;
- it offers flexibility for employees also, who may have commitments such as study or children and require short-term work, short shifts, or work outside of regular business hours.
Australian Bureau of Statistics figures show about one in four employees is described as casual. Casual employees are more likely to be women and younger workers in low-paid sectors.
How is casual loading calculated?
The percentage rate of casual loading is determined by the award or agreement covering the specific job. The employee’s hourly rate is multiplied by the percentage of the casual loading rate.
When casual employees work on public holidays, weekends, overtime or outside ordinary business hours, they are entitled to penalty rates. Awards and agreements can stipulate that casual loading be paid on top of penalty rates. Of those awards and agreements which provide for this, in cases of overtime, the casual loading and overtime penalty can be paid separately; or the casual loading can be compounded with the overtime penalty to create an “all-purpose rate”.
Casual employment rights
Although casual work is insecure, casual employees do have a range of employment rights.
Due to casual employees having no guarantee of hours, an employer can offer work at short notice. A casual employee is not obligated to accept work, but if they do, a minimum engagement period could apply, which means the employee must be paid for a minimum number of hours, whether those hours are worked or not.
Sick leave and annual leave
Casual workers are not entitled to paid leave, but under Fair Work laws they are entitled to 2 days’ unpaid carer’s leave, and 2 days’ unpaid compassionate leave per occasion; unpaid community service leave; and 5 days unpaid family and domestic violence leave (in a one-year period).
There is no minimum notice period to end casual employment, for an employee or employer. There are exceptions in some awards or agreements.
Change of status
Casual employees can change to full-time or part-time employment at any time by agreement. Most awards have a process for transfer of status. After at least 12 months of regular and systematic employment, a casual employee has a right to request flexible working arrangements, or 12 months of unpaid parental leave.
Employers must pay superannuation when a casual employee is aged over 18 and earning more than $450 a month.
Other legal rights
There are restrictions on when casual employees can access unfair dismissal protections: they will need to have worked 6 months in the same job, or 12 months if the employer is a small business (one with fewer than 15 employees). However, casual employees receive the same legal coverage as permanent employees in areas of occupational health and safety, equal opportunity, workers compensation and unjon membership.
Case law on casual loading
Two recent Federal Court cases have upheld the view that casual employees who have a firm commitment from their employers as to the term and hours of their employment can be deemed permanent employees, and as such, are entitled to paid leave entitlements.
WorkPac v Skene (2018)
Skene had been employed to work as a dump-truck driver at mining sites by labour-hire company WorkPac. The contract identified him as a casual employee. He worked on a rotating roster set a year in advance, doing 12-hours days, with seven days on and seven days off. He was paid a flat rate of $50 (which was increased to $55), which was referred to as an hourly rate and did not specify a casual loading component.
When Skene’s employment ended, he claimed he was not a casual but a permanent employee and was therefore entitled to payment for accrued annual leave.
The court agreed, ruling in his favour, and confirming the long-held view that casual employment is irregular, uncertain, unpredictable and intermittent.
In light of the ruling, employers feared employees could effectively “double dip” by being paid both casual loading and annual leave entitlements. The Federal Government then passed the Fair Work Amendment (Casual Loading Offset) Regulations 2018, which allow an employer to claim relief via an offset in circumstances similar to that in WorkPac v Skene.
WorkPac v Rossato (2020)
Rossato had been employed by WorkPac as a casual employee for 6 consecutive contracts spanning nearly 4 years. He asserted to the company he had been a permanent rather than casual employee and was therefore entitled to outstanding entitlements to annual leave, paid personal/carer’s leave, paid compassionate leave and payment for public holidays.
The court agreed, ruling that the parties had agreed on employment that was stable, regular and predictable and so Rossato was not a casual employee. It directed Rossato be paid the entitlements he sought as a permanent employee, and that WorkPac could not rely on the Fair Work regulations to offset the amounts of casual loading it had paid.
As a result of this, employers should conduct an audit of their casual workforce to assess whether any staff could be regarded a permanent employee if their position were challenged.
For advice or representation in any legal matter, please contact Armstrong Legal.