Casual Loading: What Employers Must Pay and How to Set It Up

You have just hired a casual cleaner at $30 an hour. Your payroll software asks for an hourly rate, you type 30, and the first pay run goes out.

Seven months later a Fair Work letter arrives. $30 was the base rate for a permanent employee, and the casual should have been on $37.50 the whole time.

That is the most common casual loading mistake we see, and it’s rarely deliberate. The software didn’t ask about loading, nobody told you, and the number looked right. This guide covers what casual loading is and what the 25% rate actually costs once super and overtime are layered on. It then shows how to set it up in Xero so the loading is calculated and shown correctly every pay run.

If you employ casuals under a modern award, read the Xero section carefully. Xero has no casual loading switch (yes, really), so the setup choice you make determines whether your overtime is right.

What is casual loading and why does it exist?

Casual loading is an extra percentage paid on top of a casual employee’s base hourly rate, and under most modern awards it is 25%. It exists because casuals do not get paid annual leave, paid personal leave, paid public holidays off, notice of termination or redundancy pay. The loading is the trade: more cash per hour in exchange for fewer entitlements.

The 25% is set by each award, not by a single national rule. Some enterprise agreements use a different figure, and a handful of awards express the casual rate as one loaded number.

The Fair Work Ombudsman’s casual employees page is the reference point, and the award itself is the final word.

One thing that trips up employers in NSW, Queensland and Victoria: people search for “casual loading rate NSW” as if the states differ. They don’t. The award applies nationally, so a casual cleaner in Parramatta and one in Brisbane get the same loading percentage.

If a casual is on your payroll at the permanent base rate, you’re underpaying them by 20% of what they should receive every single hour.

How much is casual loading in 2026?

At 25%, a $30 base rate becomes $37.50 an hour. A $27.08 base (the Level 1 rate under the Cleaning Services Award from 1 July 2026) becomes $33.85. The maths is base rate multiplied by 1.25, and the loading is paid on every ordinary hour worked, including weekends.

Where it gets more involved is penalty rates and overtime. Under the Cleaning Services Award, the loading stacks on top of the penalty rather than multiplying it.

Saturday work for a permanent cleaner is 150% of base; for a casual it is 175%, meaning the 150% plus 25 percentage points. Overtime works the same way. The first two hours Monday to Saturday are 150% for a permanent and 175% for a casual, then 200% and 225% after that.

Other awards do it differently. Hospitality and restaurant awards pay casuals the same overtime rate as permanents with no loading on overtime hours at all. That’s why the “one setup fits every employee” approach breaks down, and why the payroll section below matters.

Percentages are from the Cleaning Services Award 2020 (MA000022). Check the current pay guide for your classification before relying on dollar figures.

Is casual loading included in the hourly rate, and does super apply?

Both questions come up constantly, and getting either wrong creates a compliance problem.

On the first: you can quote a casual an all-inclusive rate, but the payslip still has to show the loading as a separately identifiable amount. The Fair Work Regulations require any loading that can be separated out from the ordinary hourly rate to appear on the payslip. A single line reading “Ordinary hours $37.50” with no mention of loading does not meet that. It also leaves the employee (or an inspector) unable to check the base rate against the award.

On the second: yes, superannuation is payable on casual loading.

The loading forms part of ordinary time earnings, so the 12% super guarantee applies to the loaded rate, not the base. At $37.50 an hour that is $4.50 of super per hour, not $3.60. Loading paid on overtime hours is the exception, because overtime itself isn’t ordinary time earnings.

Super is calculated on $37.50, not $30. Get the OTE flag wrong in your payroll software and you’ll underpay super on every casual hour.

With Payday Super now live, that underpayment shows up every pay cycle rather than every quarter. Easier to spot, harder to quietly fix.

Who must be paid casual loading?

Anyone who meets the Fair Work Act definition of a casual employee. Since 26 August 2024 that definition looks at the real nature of the relationship. The test is whether there is no firm advance commitment to continuing and indefinite work, judged on how the job actually operates rather than what the contract says.

A cleaner rostered the same 20 hours every week for two years, with no ability to decline shifts, is at risk of being found permanent regardless of what you call them. That doesn’t remove the loading obligation while they are casual.

There are two paperwork obligations that go with this. You must give every new casual the Casual Employment Information Statement when they start, and again at 12 months. Larger employers also issue it at six months and annually after that.

Once a casual has been with you six months (12 months if you have fewer than 15 employees), they can notify you in writing that they want to convert to permanent. That is the employee choice pathway, and you have 21 days to respond.

What does a casual really cost compared with a permanent employee?

This is the question the 25% headline hides. Most owners assume a casual costs a quarter more than a permanent. Once you count the hours a permanent is paid but not work, the gap is much smaller, and under some awards it reverses.

Take a cleaner on a $30 base rate, 38 hours a week, and compare the annual cost per hour actually worked. Figures are illustrative only, exclude workers’ compensation and payroll tax, and assume all leave is taken.

Example only. Permanent hours worked assume 4 weeks annual leave, 10 days personal leave and 10 public holidays taken. Casual hours matched for comparison; in practice casual hours flex with demand.

The gap is about 4%, not 25%.

Under the Cleaning Services Award, a part-time cleaner attracts a 15% part-time allowance on every ordinary hour on top of full leave entitlements. That pushes their cost per worked hour above the casual’s. (This one surprises almost everyone.)

So the real decision is not about the loading. It’s whether you need hours that flex with your contracts, and whether you can carry the risk that a long-term “casual” is later found to be permanent.

In your P&L, watch the wages-to-revenue ratio by month rather than the hourly rate. A casual-heavy roster should move with revenue. If it doesn’t, you are paying for flexibility you are not utilising.

The 25% loading is a flexibility premium, not a 25% cost penalty. Price it against the hours you’d otherwise pay for and not get.

How do I set up casual loading in Xero?

Xero does not have a casual loading setting. Selecting “Casual” as the employment type changes leave accruals and the Casual Employment Information Statement prompt, but it does nothing to the pay rate. You have to build the loading yourself through pay items, and there are two ways to do it.

Which method should I use?

Method 1 for almost everyone. The loading sits on its own pay item as a 25% multiple of the base rate, so the payslip shows base and loading separately, super calculates on both, and the 1 July award increase only needs one number changed. The trade-off is that loading hours don’t flow from timesheets automatically, which is a known gap Xero has not closed yet.

Method 2 works if you have one or two casuals, no overtime and no timesheets. Beyond that it gets fragile, because every overtime and penalty multiple has to be recalculated against a loaded base.

Whichever you pick, the overtime items are where it goes wrong. Xero’s standard 1.5x and 2x items are built for permanents. A casual under the Cleaning Services Award needs their own overtime items set to the award’s casual percentages, and those percentages differ between awards. If your casuals have ever been paid overtime off the default items, the figure is wrong in one direction or the other.

Three setup mistakes that cause underpayments

First, the loading item is marked exempt from super. This is the quiet one; nobody notices until an ATO review or a departing employee runs the numbers.

Second, the casual’s ordinary rate is left at the base rate with no loading item at all, usually because the record was copied from a permanent employee.

Third, the generic overtime items are used for casuals. Under the Cleaning Award that underpays by $7.50 an hour on the first two overtime hours.

What happened when a cleaning business got this wrong?

Maria runs a commercial cleaning business in Western Sydney with nine casual cleaners servicing strata and office contracts. Her bookkeeper had set up Xero using the single loaded rate method, which was fine for ordinary hours.

The problem was overtime. The default 1.5x item was applied to the $37.50 loaded rate, so every overtime hour was paid at $56.25 instead of $52.50.

That is an overpayment of $3.75 an hour. Across roughly 400 overtime hours a year it costs her about $1,500 plus super she didn’t need to pay. Not catastrophic, but not nothing.

The bigger issue was one cleaner, Marco, who had been added in a hurry by copying a permanent employee’s record. He had been paid $30 an hour flat for seven months, no loading.

At 22 hours a week over 30 weeks, the shortfall was $4,950 in wages plus $594 in super. Marco noticed when he compared payslips with a colleague.

Maria back-paid him within the fortnight, which is the right call and usually heads off a Fair Work complaint. We then rebuilt her pay items under Method 1, added 175% and 225% casual overtime items, and ran every casual’s last three payslips against the award.

Total fix time was about four hours. The overtime overpayment alone was not material (roughly 0.1% of her $1.4M revenue). The exposure on the other side, nine casuals whose payslips couldn’t demonstrate the loading, was the thing worth four hours of anyone’s time.

Copying a permanent employee’s record to create a casual is the fastest way to underpay someone for months without noticing.

What are the penalties if I get casual loading wrong?

Underpaying casual loading is a breach of the award, and the exposure is back pay plus super plus interest, going back up to six years. Fair Work can also issue infringement notices or pursue penalties in court, and since 1 January 2025 intentional underpayment has been a criminal offence under the Fair Work Act.

For most businesses the real cost is the back-pay bill and the time spent reconstructing seven months of payslips.

The lower-profile risk runs the other way. If a long-term casual is found to be permanent, the loading you paid doesn’t automatically offset the leave they are now owed.

If you’d rather someone else carried this, our bookkeeping packages include payroll setup and award checks at a fixed monthly fee. The STP finalisation checklist covers what to reconcile before 14 July each year.

This article provides general information only and does not constitute financial, legal, or tax advice. The information is current as at November 2026. For advice specific to your circumstances, please consult a qualified professional.