To put it in simple words, leave loading is the compensation (17.5%) that an employer gives an employee for taking leave.

When an employee takes leave, he does not have the chance to work overtime or do other things that might get them an extra bit of cash on their pay check.

Therefore, the loading is that extra earnings that the employee didn’t have the chance to work for.

For additional information please see this article from the Fair Work Ombudsman.