Managing Long Service Leave in Australia

Most people understand the basic principles of long service leave (LSL) – it is an extended period of leave that a person is only able to take after they have been employed for a long period of time. You may also be aware that a person is entitled to be paid out their LSL if they leave the business after a certain amount of time. However, LSL can be a complex workplace entitlement, particularly for those business’ operating across state borders or within certain industries. This article will look to simply explain some of the more difficult aspects of LSL in Australia.

Calculating LSL

Calculating employee long service lease entitlements is a complex process involving many factors and variables. It may be preudent to contact Sync or Swim or your accountant for assistance with this process. To provide an example of how LSL works we will have a brief look at the general position in Victoria. For the most part, workers are entitled to 8.6667 weeks of paid leave after a period of 10 years continuous service. After 10 years, an employee is entitled to take leave at the same rate every 5 years (i.e. 4.333 weeks of leave every 5 years).  In addition to this, employees are entitled to be paid out their remaining leave balance if they leave their position before their LSL balance is exhausted. However, it is illegal to be paid cash in liew of taking a holiday whilst the employee remains employed by the employer who owes the LSL obligation.

A key term is ‘continuous service’. Continuous service can include an employee being transferred and potentially when an employee is dismissed and re-employed within an organisation. It may also include when a business closes, changes hands and then re-opens.

LSL across Australia

Whilst the above example is fairly straightforward, this is merely the position under the general LSL laws in Victoria. These rules differ between each state and even differ between employees within the same state.

The variance of LSL rules between states can create some difficulties for cross-border businesses. Each state has general laws on LSL that are used by default, and larger businesses should be aware of their different obligations in each state. To determine which laws apply to which employee, ask yourself, in which state does the employee work?

Each state has general laws on LSL that are used by default, however they may be overridden in certain situations. One of those instances is when a federal pre-modern award would have covered an employer and employees prior to 1 January 2010. Therefore, even if an employee is under a modern award, you must look to see whether their position came within a pre-modern award (you can search here). If it did, then you must use the LSL entitlements in the pre-modern award. Furthermore, if an employee comes under a registered agreement then their LSL entitlements may be contained within the registered agreement.

Industry specific LSL

To further complicate matters, different long service leave rules may apply depending on which industry the business operates in. Typically, the industries that have separate long service leave rules are project based and see workers move around frequently. Such industries include:

  • Building and construction;
  • Coal mining;
  • Contract cleaning.

In many cases, these industries have established a body which receive a levy from employers that is used to pay registered workers long service leave once they have worked in the industry for a certain period irrespective of who their direct employer was.

Another point of potential confusion relates to employees in seasonal industries. In Queensland, there is specific legislation for those who work in the sugar industry or meat works. In this situation, employees are entitled to an amount of LSL depending on how much they’ve worked. For example, if an employee has worked for half a year for 10 years, that equals five years of full time. As 5 years is half of the 10 year requirement, the employee would be entitled to half of the 8.6667 weeks of LSL a normal employee would be entitled to after 10 years.

In addition to this, employees in all types of seasonal industries throughout Australia may have similar entitlements under common law however this is not certain. For information on whether this applies, please seek legal advice.

LSL for casual employees

An employee’s time as a casual worker may also contribute to their LSL entitlements. In Queensland (and there are similar rules in other states), a casual employee’s claim to LSL depends on the hours that they have worked. It is calculated using the following formula:

(hours worked/52) * (8.6667/10)

Therefore, if a person works 15,000 hours over 10 years they would be entitled to 250 hours or in other terms, 6.6667 weeks of full-time equivalent LSL.

If an employee changes from casual to part-time or full-time throughout their employment then they are still entitled to LSL 10 years from the day they started working as a casual. Their entitlement after 10 years is calculated by using the above formula for their time as a casual employee and the normal rate under the applicable entitlements for their time as a full-time or part-time employee.

Conclusion

As you can see, LSL can become confusing due to the various rules throughout Australia. For information on the LSL entitlements in each state, please visit Fair Work Australia. If you have any enquiries relating to your business’ LSL requirements, please contact Sync or Swim.

Information contained in this article is general in nature, and is not offered as advice specific to your business. If you think the topics discussed in this document could be relevant to your business, please contact Sync or Swim or your accountant.