5 Things Aussie Employers Gets Wrong About Holiday Pay

We reveal the five biggest mistakes Aussie employers make when calculating holiday pay and offer practical advice on how to stay compliant, fair, and stress-free this Christmas season.

The end-of-year break should be a time to celebrate, not stress over payroll errors, but every December, thousands of Australian businesses get caught out by holiday pay misunderstandings.

From misapplied penalty rates to confusion around leave loading and “on call” hours, getting it wrong can lead to Fair Work breaches, backpay claims, or even legal action.

Here are five of the most common holiday pay mistakes and how to fix them before the summer rush.

1. The Penalty Rate Myths That Cost Small Businesses Thousands

Many employers still assume that public holiday and weekend penalties don’t apply to casuals or that “holiday spirit” hours can be swapped out later. Under Modern Awards, that’s incorrect.

Each industry has specific rules: under the Hospitality Award, for example, casuals working on Christmas Day can receive up to 275% of the base rate, while permanent staff are also entitled to a public holiday penalty even when taking time off.

Because public holidays vary by state, businesses must double-check which days apply, such as Proclamation Day in SA or Show Holidays in QLD before running payroll. Getting this wrong can trigger expensive backpay calculations or Fair Work complaints.

2. How to Avoid Double-Dipping on Leave Loading

Leave loading (the 17.5% boost applied when staff take annual leave) is one of the most misunderstood entitlements in Australia.

Some employers mistakenly pay leave loading on top of public holiday penalties or apply it to casual staff (who already receive a 25% loading in lieu of leave). Others overlook it entirely for full-time and part-time employees covered by the Retail, Clerks, and Hospitality Awards, where it’s explicitly required.

To stay compliant, ensure payroll systems correctly separate annual leave loading from casual loadings or penalty rates. The Fair Work Ombudsman recommends clearly itemising each component on payslips, avoiding confusion and potential overpayments.

3. When Staff Are “On Call” and What That Really Means Legally

The Christmas period often blurs the line between “available if needed” and “actually working.” Under most Modern Awards, employees who are “on call” or “standby” may be entitled to a minimum payment even if they’re not called in, especially in sectors like health, aged care, or trades.

The Health Professionals and Support Services Award, for example, mandates specific rates for on-call periods and call-backs.

Employers should define on-call expectations clearly in contracts or policies and ensure rosters accurately capture any recall hours, travel time, or penalty entitlements, particularly over public holidays, when rates can climb fast.

4. Forgetting That Public Holidays Aren’t the Same Everywhere

Not all public holidays are created equal and they don’t all fall on the same days across states.

For instance, Boxing Day is a public holiday nationally, but Proclamation Day is unique to South Australia, Show Holidays vary by region in Queensland, and Easter Saturday is treated differently in Victoria and Tasmania.

Employers with remote or interstate teams must apply the public holiday rules relevant to where the employee actually works, not where the business is based. Failing to do so can lead to underpayments or payroll errors across jurisdictions.

5. Skipping the Checks Before Payroll Runs

Holiday pay errors often stem from rushed processes rather than bad intentions. A simple end-of-year payroll audit can prevent most issues:

Confirm the correct Modern Award and classification level for each employee.

• Ensure leave balances, loadings, and public holiday rates are configured correctly in payroll software.
• Review casual rosters for compliance with minimum shift lengths and breaks.
• In states like NSW and VIC, Fair Work Inspectors frequently target December payrolls for audits, so documentation and accuracy are key.