Long Service Leave – Wading Through the Complexities
Posted by: on 20 January 2015 in Payroll
January 20 – by Sue Warren
Long service leave (LSL) is a period of paid leave given to employees, both casual and permanent in recognition of a long period of service with one employer. It is unique to Australia as it was created to give immigrant workers the opportunity to return home to Europe by ship to visit family.
While LSL is included as one of the 10 National Employment Standards, it is actually based on State and Territory regulations (Acts). As a result LSL entitlements vary based on where the employee is working.
Unlike annual or personal leave which accrues in hours, LSL accrues as a number of weeks of leave. The weeks accrued are based on the number of years worked. For example in NSW and Victoria employees receive 0.8667 weeks of LSL for each completed year. Therefore an employee with 11.5 years of service would have accrued 9.967 weeks long service leave. (11.5 years X 0.8667 weeks).
When employees are entitled to be paid LSL you have to calculate the amount to be paid based on their normal weekly hours. This is easy for permanent employees who have never changed their hours, however where an employee’s hours have varied, you have to calculate the weekly LSL amount as:
- The greater of the average hours over the preceding 12 months, or the preceding five years (NSW and VIC)
- The average weekly hours over 3 years (SA)
- Total ordinary hours worked / 52 X 0.8667 (QLD)
- Average weekly hours over period of employment (WA)
- Average weekly earnings over previous 12 months (TAS and NT).
In Queensland and Western Australia this means you have to keep all your employment records back to the hire dates of your oldest employee.
You also need to check the relevant LSL Act for the requirements for employees paid commissions and bonuses.
Untaken long service leave (and pro-rata) is usually paid on termination, although this can depend on the reason for the termination and the applicable LSL Act.
Victoria is straightforward as you pay pro-rata LSL to all employees at 7 years, regardless of the termination reason. All other states are more complex. For example in NSW you have to pay it out at 5 years if the termination is initiated by the employer for anything other than serious and wilful misconduct. When the employee resigns because of illness or incapacity, or for domestic or pressing necessity it is also paid at 5 years. The challenge is defining what constitutes domestic of pressing necessity.
As rules vary in each LSL Act other points to consider include:
- Is their rules about when the employee has to take their LSL
- Over how many separate periods can you pay the LSL
- Can LSL be cashed in – in NSW, VIC, ACT and NT it can’t under any circumstances (other than at termination)
- What hours, and how often does a casual have to work, to maintain continuous employment
- What constitutes a break in service
- Is LSL increased a day for each public holiday
- Do employees forfeit their LSL if they worked elsewhere while on leave
- Are employees working in the building & construction/mining industries as the rules differ.
For additional information on LSL refer to the LSL Acts for each applicable state or territory at:
- New South Wales – Long Service Leave Act 1955
- Victoria – Long Service Leave Act 1992
- Queensland – Industrial Relations Act 1999
- South Australia – Long Service Leave Act 1987
- Western Australia – Long Service Leave Act 1958
- Tasmania – Long Service Leave Act 1976
- Northern Territory – Long Service Leave Act
- Australian Capital Territory – Long Service Leave Act 1976