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Long Service Leave

The entitlement to Long Service Leave (LSL) is contained in the National Employment Standards (NES). As of 1 January 2010 the NES applies to all employees covered by the national workplace relations system (national system employees)

There is currently no uniform national LSL standard, and the legislation governing LSL is contained in state Acts. For example, in NSW, LSL is governed by the Long Service Leave Act 1955 (NSW). Until a uniform national standard is developed, the state legislation needs to be read on conjunction with the NES.

This area of law can be very complicated due to the various pieces of legislation that can apply to workers, the classification of the workers relevant award, and whether that worker is a party to a pre-modern award or collective agreement.

What are the entitlements?

The NES states that an employee is entitled to LSL as per the provisions of their pre-modern award. Modern awards do not contain LSL provisions. There are however, certain instances where the entitlement to LSL from a pre-modern award does not apply, and the LSL entitlements are derived from other agreements or determinations. These include instances when:

  • a collective agreement is made after 26 March 2006, or an Individual Transitional Employment Agreement (ITEA) came into operation before the commencement of the NES, or
  • there is an instruments that excludes the provisions from an employees pre-modern award in relation to LSL, and the entitlements to LSL are contained in the instrument itself, including;
    • Enterprise agreements made before 1 July 2009 and approved by FWA,
    • Preserved state agreements, a certified agreement, AWA, section 170MX award made before 26 March 2006,
    • A workplace determination made by Fair Work Australia, or
    • An old IR agreement approved by the AIRC before December 1996.

Also, the provisions relating to LSL contained in any enterprise agreement made during 1 July 2009 – 31 December 2009 will overrule any state based legislation.

If an employee is covered by a modern award, or if there are no award or agreement terms regarding LSL, the state based provisions apply.

How much continuous service will an employee need to do to be eligible for LSL and what do they get?

In general, depending in the state/territory that the employee resides, or other instrument which may be applicable,  an employee may have to serve between 7 to 15 years to be eligible for LSL. Any untaken LSL is payable on termination, at the employees current ordinary rate of pay, with some states providing for a pro-rata payment on termination depending on the circumstances surrounding the termination.

The laws are complex, but an attempt to summarise the entitlements has been made in the table below, and some practical considerations for employers that come out of the relevant legislation have been addressed in the commentary below.

State or Territory Legislation Entitlement Pro-rata payment upon termination? Cashing In Allowed?
NSW       Long Service Leave Act 1955. 2 months per 10 years, accruing by 1 month every 5 years thereafter. Yes, for 5 years or more  in most instances, except for  dismissal for serious and willful misconduct No.
VIC Long Service Leave Act 1992. 13 weeks after 15 years. Calculated on a pro rata basis after 10 years. Yes, after 7 years in all circumstances. No.
QLD Industrial Relations Act 1999. 8.6667 weeks after 10 years service. Yes, after 7 years except in cases of dismissal based on conduct, capacity or performance. Only if permitted by Industrial Agreement, or by approval of the Commission on hardship grounds
SA Long Service Leave Act 1987 13 weeks after 10 years and a further 1.3 weeks for every year thereafter Yes, after 7 years except for dismissal for serious and willful misconduct or employee instigated unlawful termination. Yes, if agreed in writing
WA Long Service Leave Act 1958 (as amended 4 July 2006). 8 2/3 weeks for each 10 years service. Yes, after 7 years except for dismissal for serious and willful misconduct. In most circumstances, Yes.
TAS Long Service Leave Act 1976. 13 weeks after 15 years service. Yes, after 7 years except in cases of serious and willful misconduct Yes
ACT Long Service Leave Act 1976. 1/5 of a month for each year of service. Entitled to take after 7 years. Yes, after 5 years except in circumstances of serious and willful misconduct No
NT Long Service Leave Act 1981. 1.3 weeks per year available after 10 years of service. Yes, after 7 years except in instances of serious and willful misconduct. No

How is LSL paid?

LSL can be taken during the course of employment, or paid out as a benefit upon termination. If it is taken during the course of employment then the employee takes leave from work and is paid according to their current rate of pay. If it is paid out at termination then, the amount will need to be calculated (perhaps on a pro-rata basis depending on which state you are in) and then paid out, subject to relevant taxation laws. The amount is based on the employees current rate of pay.

In some select jurisdictions, LSL can be cashed out as detailed above, although there may be certain circumstances that may need to be demonstrated prior to any cashing out occurring, so it is best to refer specifically to your own state legislation before considering this.

What counts as continual service?

The entitlement to long service leave is based on an employees continual service to an employer for the periods specified in the table above. Time spent on paid leave will count towards this continual service. Other periods of unpaid leave will not count towards LSL accrual (such as parental leave) but will not break the continuous employment relationship with the employer. For example, if Mary (NSW) works for her employer for 6 years, then takes a year off on parental leave and then returns to work, she will be entitled to LSL after 11 years with the employer (provided there are no more periods of unpaid leave taken).

What about part-time or casual employees?

Part time employees are still eligible to receive LSL, subject to the minimum service requirements being met. In some instances, an employers hours may have varied over the course of their employment. For example, if a full time worker moves to part time. The relevant LSL Acts outlined above will give guidance on how to calculate LSL payable in these circumstances, but as a general rule, LSL is payable based on the hours that the employee is doing immediately before taking LSL. If those hours have varied in the last twelve months, then it may be stipulated that an average amount of hours is calculated.

Casual employees, may, in certain circumstances, be eligible for LSL. This will depend on the jurisdiction in question, but generally, if the casual workers hours are regular in nature and there has been no break in employment, the employee will be entitled to LSL benefits. Some states impose a minimum monthly hour’s amount for a casual employee to benefit from LSL also. LSL benefits for eligible casual employees are generally calculated based on an average amount of hours over their whole employment period.

What are the notice and consent obligations?

The notice requirements for employees taking long service leave will vary from state to state, and in some cases, a pre-modern award or agreement will set out what these requirements are. Employers and employees will need to check the provisions that are applicable to them, but generally, most long service leave will require at least one months notice to be given by the employee. An employer cannot unreasonably deny long service leave.

What happens upon the sale or transfer of a business?

We covered the definition of a ‘transfer of employment’ in our earlier annual leave article. To recap though, a transfer of employment occurs when an employee moves from one employer (the old employer) to another employer (the new employer) within three months of a transfer of business and performs substantially the same work for the new employer as they performed for the old employer.

A transfer of employment can also occur where an employee moves from one employer (the old employer) to another employer (the new employer) who is an associated entity of the old employer within a specified time frame of ending employment with the old employer (this time frame may vary state by state).

A transfer of business can occur where one of the following connections between the old employer and the new employer exists:

  • a transfer of assets,
  • outsourcing,
  • insourcing, or
  • where the two employers are associated entities.

When there is a transfer of employment, the period of service with the old employer will generally count as service with the new employer, and the employee will keep any LSL they had accrued with the old employer.

However, in some states, where the employers are not associated entities, the new employer can decide not to recognise an employee’s service in relation to LSL with the old employer. In such cases, the old employer will be required to pay out the employee’s untaken accrued long service leave. This step needs to be approached with caution however, as in some jurisdictions, it is unlawful to cash out long service leave early, and what is determined as a transfer of business may be complex.

What are the penalties for non-compliance with the legislation?

All LSL is required to be paid in full in all instances where LSL is payable. In addition to this there are various penaltiesfor employers who do not comply with the relevant LSL laws. These are normally expressed by way of ‘penalty units’ imposed for those who do not comply. In most jurisdictions the fine for a breach of the relevant LSL legislation is around 20 penalty units, which at the moment equates to approximately $2200 (subject to change).  On top of this, in some states, criminal convictions can apply to employers who fail to make the long service leave payments to their eligible employees.

Points for Employers.

  • Have a thorough understanding of the LSL entitlements that may be payable to your employees.
  • Not all employees may be entitled to the same amount of LSL, depending on the award, agreement or instrument that is applicable to them.
  • Keep adequate records of start dates for all employees and consider keeping a journal of outstanding long service leave in a excel spreadsheet, updated monthly.
  • The laws in this area are quite complex, so if in doubt, seek help from a professional as to how the LSL legislation applies to you and your employees.

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Author: Danica Leys
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It is intended as a guide only and does not replace specific legal advice.

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