What Employers Need to Know about Long Service Leave

What is long service leave?

You likely have employees in your business who have demonstrated exceptional loyalty and commitment by working with you for extended periods. As an employer, it's important to understand that many of these employees may be entitled to long service leave benefits. The primary source for determining employees' entitlements will be:

• The long service leave law of the State or Territory the employee works within (the main source for most employees); or
• Any applicable pre-modern award or enterprise agreement whose long service leave terms are preserved by the National Employment Standards (NES) in the Fair Work Act 2009; or
• A portable long service leave scheme in certain industries.

Each jurisdiction has slightly different rules to clarify their approach to long service leave. Essentially, long service leave entitlement centers around two points. The first being qualifying period which details the length of service needed for an employee to be eligible for the leave (e.g., 7 years, 10 years, etc.). The second being the amount and payment outlining the precise time off the employee is entitled to (e.g., 8 weeks), and how their payment is calculated during the leave.

In addition, under most State and Territory schemes, even long-term casual employees are eligible for long service leave benefits.

Payment during long service leave

Employees are entitled to be paid their 'ordinary pay rate' throughout their long service leave. This typically encompasses their base pay rate for ordinary hours, including annual leave entitlements. The 'ordinary pay rate' does not include:

• Certain allowances
• Shift loadings
• Penalties
• Overtime

For most employees, their long service leave payments are calculated at their normal weekly hours at the pay rate they would have received as if they were still actively working. However, variations in this general rule can exist depending on the specific long service leave scheme applicable to the employee.

If an employee doesn't have a fixed 'ordinary' rate of pay (for example, those paid by commission or irregular casual workers), determining their long service leave pay gets a bit more detailed. In these cases, several calculation methods from the relevant long service leave scheme often need to be compared, with the option providing the most favourable pay rate to the employee being used. Common examples include:

• Average weekly earnings over the prior 12 months
• Average weekly earnings over a specified number of past years
• Average weekly earnings across their entire employment period

Always remember that any remaining unused long service leave must be paid out when an employee's tenure with the business ends. Under most schemes, employees cannot 'cash out' long service leave while they are still actively employed unless specific provisions or exceptions exist within their long service leave scheme.

Calculating long service leave

Accurately calculating long service leave requires a careful approach, as differences exist between states and territories in Australia. It's essential to always refer to the specific Act governing the state or territory where your employee is employed at the time they start their leave. Let's use New South Wales as a case study. In this NSW:

• An employee becomes eligible for 2 months (8.6667 weeks) of long service leave after they have accumulated 10 years of continuous service with the same employer.
• This entitlement increases by a further month (4.3333 weeks) for every additional five years of service beyond the initial 10-year period.

Each state and territory has its own set of rules and regulations regarding the calculation of long service leave. Don't assume the New South Wales example applies across the board – always consult the relevant legislation for your employee's location.

Eligibility for long service leave

The key element of qualifying for long service leave is continuous service with the same employer (unless a portable long service leave scheme is in place). It's important to clarify that "continuous employment" doesn't mean the employee must have remained in the exact same position through their tenure. Changes in the following are typically acceptable:

• Duties and responsibilities
• Pay rate
• Job title

Although, extended periods of unapproved unpaid leave may negatively impact the continuity of service and therefore their long service leave eligibility.

Under certain long service leave schemes, there are two circumstances that might still be considered as continuous service. They include where an employee is transferred between companies belonging to the same corporate group or the business is sold, with the employee continuing their employment under the new ownership.

The precise length of service required to qualify for long service leave differs based on the applicable long service leave scheme. In some cases, when employment ends before an employee reaches the full entitlement threshold, they may be eligible for pro-rata long service leave on termination.

Availability of pro-rata leave, qualifying reasons (eg., illness, retirement), and time frames are all governed by the specific long service leave scheme applicable to the employee. Keep in mind that in Victoria, employees who leave before completing 7 years of continuous service are not entitled to a pro-rata payment.

What is portable long service leave?

Across certain industries in Australia, a unique system called portable long service leave exists. This system benefits employees in fields like security, community services, building and construction, black coal mining and contract cleaning. Unlike traditional long service leave plans, portable schemes allow employees to continue accruing leave entitlements even when moving between different employers within the same industry.

The primary advantage of portable long service leave is that dedicated individuals who remain working within a designated industry don't lose out on building up their much-deserved leave benefits simply because they've chosen to work for multiple employers.

Portable long service leave schemes are regulated by state and territory legislation. Not every location in Australia offers them, and those that do may have unique rules governing eligibility and access to the leave benefits.

State and Territory long service leave laws

Long service leave entitlements are largely dictated by state or territory legislation (unless other schemes apply). Modern Awards rarely contain their own long service provisions, meaning you'll usually need to reference the law specific to your employee's location for accurate details.

The summaries provided below offer a starting point for your understanding. Always consult the official legislation or seek professional advice to ensure you have the most up-to-date and accurate information for your specific circumstances.

New South Wales

In New South Wales, the Long Service Leave Act 1955 (the Act) provides the primary framework for understanding long service leave rights. This Act applies to most employees unless they are covered by a pre-modern award, a portable long service leave scheme, or have specific provisions outlined in a contract, enterprise agreement, policy, or separate piece of legislation.

The Act lays out the following core entitlements for New South Wales employees:

• After completing 10 years of continuous service with the same employer, an employee becomes entitled to two months (8.6667 weeks) of long service leave.
• For each subsequent five-year period of employment, an employee earns an additional month (approximately four and a third weeks) of long service leave.
• Full-time, part-time, and even casual employees can potentially qualify for long service leave, provided they meet the required duration of continuous service.

In certain circumstances, employees who have worked for at least 5 years, but less than 10, may receive pro-rata long service leave upon termination. This typically applies if the employee resigns due to illness, incapacity, domestic or other pressing necessity, if the employee dies, or if the employer ends the employment for any reason other than the employee's serious and wilful misconduct. Keep in mind that pro-rata entitlements do not apply in cases of termination for serious misconduct.

The New South Wales Act does not allow employees to 'cash out' their accrued long service leave while they are still actively employed.

Victoria

For many employees in Victoria, the Long Service Leave Act 2018 (the Act) is the primary legislation governing their long service leave entitlements. Key points to note are that the Act likely applies to you unless you are covered by a pre-modern award, portable long service leave scheme, or other provisions outlined in a contract, enterprise agreement, policy, or specific legislation.

Construction workers may fall under the separate Construction Industry Long Service Leave Act 1997. This legislation provides for portable long service leave administered by CoINVEST.

Under the Long Service Leave Act 2018, Victorian employees:

• Qualify for long service leave after completing a minimum of 7 years of continuous service with their employer.
• Are entitled to approximately 6.1 weeks of leave (calculated as 1/60th of the period of continuous employment) on ordinary pay.
• Can potentially qualify regardless of their employment status (full-time, part-time, casual, or seasonal) provided they meet the continuity of service requirement.

A unique aspect of Victoria's legislation is that there is no pro-rata payment for employees who leave before 7 years (after 7 years, all accrued leave is paid out when employment ends), and accrued leave can't be cashed out while the employee is still actively employed.

Australian Capital Territory

The Long Service Leave Act 1976 (the Act) serves as the primary guide for long service leave entitlements in the ACT for most employees. This applies unless another arrangement, such as a pre-modern award, portable long service leave scheme, contract provision, enterprise agreement, or specific policy overrides its provisions.

Public sector workers or those covered by the Long Service Leave (Portable Schemes) Act 2009 are not subject to the Long Service Leave Act of 1976.

The Act outlines the following key points for ACT employees:

• Eligibility for long service leave begins after completing seven years of continuous service with the same employer, resulting in an entitlement of just over six weeks of leave.
• For each subsequent year of continuous service, employees further accrue one-fifth of a month of long service leave. This unique structure means leave may be available annually after the initial qualifying period.
• Full-time, part-time, and casual employees may qualify if they meet the continuous service requirement.

Under the ACT legislation, an employee who leaves their position after at least 5 years, but before reaching 7 years, of continuous service may be eligible for pro-rata long service leave if:

• Resignation is due to illness, incapacity, or a domestic or other pressing necessity.
• The employee leaves upon reaching (or exceeding) the minimum retiring age.
• The employee passes away.
• Termination occurs for reasons other than serious and willful misconduct on the employee's part.

Long service leave in the ACT cannot be cashed out while the employee is still actively employed; the leave must be taken.

Western Australia

The Long Service Leave Act 1958 (the Act) provides the foundation for understanding long service leave rights in Western Australia (WA). Keep in mind that this may not apply to all employees. Construction industry workers, National System employees covered by certain pre-modern federal awards, and in some cases, those within federal registered agreements fall under separate legislation or provisions.

An award, contract, industrial agreement, or other statute at the State, Territory, or Commonwealth level may offer even more generous leave entitlements than the Act, or possibly supersede it entirely.

For those covered by the Act, these are the primary points to remember:

• Employees in WA become eligible for long service leave after reaching 10 years of continuous service with the same employer, at which point they earn over eight weeks (specifically eight and two-thirds weeks) of leave.
• Upon completing each subsequent five-year period of continuous service, the employee is entitled to a further four and one-third weeks of leave.
• Full-time, part-time, and casual employees can potentially qualify provided they meet the continuous service requirement.

Western Australia's laws do permit pro-rata long service leave when an employee has accumulated between 7 and 10 years of continuous service, if their employment ends for any reason (including resignation) other than dismissal by the employer for serious misconduct, or because the employee dies.

Employers and employees in WA may be able to reach a written agreement allowing for partial cashing out of accrued long service leave. Check for any specific conditions or restrictions that might apply.

Northern Territory

For employees in the Northern Territory, the Long Service Leave Act 1981 (the Act) serves as the primary source of guidance on long service leave entitlements. However, always remember that government employees and construction workers likely fall under separate legislation. Additionally, pre-modern awards, portable long service leave schemes, contracts, enterprise agreements, policies, or other specific legislation could introduce alternative provisions.

For those covered by the Act, these are the central points to note:

• Completing at least 10 years of continuous service with the same employer entitles an employee to a generous 13 weeks of long service leave.
• For each year of service after the initial 10-year period, an employee earns another 1.3 weeks of long service leave. However, taking this additional leave usually requires completing a further five years of continuous service.
• Provided they complete the required continuity of service, full-time, part-time, and even casual employees may qualify for long service leave in the NT.

An employee in the Northern Territory who has completed at least 7 years, but less than 10, of continuous service may be entitled to receive pro-rata long service leave if their employment is terminated due to:

• Retirement
• Illness, incapacity, or a domestic or other pressing necessity
• Employer-initiated termination (unless due to the employee's serious misconduct)

Long service leave in the Northern Territory cannot be cashed out while actively employed; the leave must be taken.

South Australia

The Long Service Leave Act 1987 (the Act) is the key piece of legislation for long service leave in South Australia (SA). However, it does not apply to every employee: government employees fall under separate rules, and workers in the building and construction industry have distinct provisions through the Construction Industry Long Service Leave Act 1987 (SA).

For those covered by the Act, completing at least 10 years of continuous service with the same employer gives an entitlement to 13 weeks of long service leave. Each full year of service after the initial 10 years adds another 1.3 weeks of long service leave entitlement and employees with at least 7 years (but less than 10) of continuous service may be entitled to pro-rata long service leave in SA if:

• Their employment is terminated by the employer for reasons other than serious and willful misconduct
• They resign after giving correct notice

A distinguishing feature of South Australia's law is that employers and employees (with at least ten years of continuous service) can reach a written agreement to cash out a portion or all of the employee's accrued long service leave entitlement.

Tasmania

Understanding long service leave entitlements in Tasmania requires paying attention to the Long Service Leave Act of 1976 (the Act). This Act generally applies unless an employee is covered by preserved pre-modern award terms, a portable long service leave scheme, an exemption granted by the Secretary or another specific law. A contract or policy can't reduce it.

Keep in mind the Act has separate provisions for mining employees. Construction industry and public sector workers may also fall under different rules entirely. For those covered by the Act, here's what you need to know:

• After completing 10 years of continuous service with the same employer, employees earn eight and two-thirds weeks of long service leave.
• Each subsequent five-year period of continuous service with the same employer results in a further four and one-third weeks of leave being added to the employee's entitlement.

While there's no universal pro-rata provision in Tasmania, an employee with at least 7 years (but less than 10) of continuous service may be entitled to pro-rata leave under certain circumstances.  These circumstances include reaching the age for retirement (65 for men and 60 for women, unless an award or contract sets another age), the employee's death, or termination by the employer (unless due to serious and wilful misconduct by the employee).  Additionally,  resignation due to illness, incapacity, or domestic or other pressing necessity may qualify in some cases.

Tasmania's law allows an employee who has become entitled to long service leave (after at least ten years of continuous service) to agree with their employer to be paid for that leave instead of taking it. Record the agreement in writing.

Queensland

In Queensland, long service leave for most employees is set by the Industrial Relations Act 2016 (Qld), unless a pre-modern award, agreement or other arrangement provides an entitlement that is at least as favourable. Workers in the building and construction, community services and contract cleaning industries may be covered by portable long service leave schemes.

For those covered by the Act, these are the key points:

• After completing 10 years of continuous service with the same employer, an employee is entitled to 8.6667 weeks of long service leave on full pay.
• After 10 years, further leave builds up at the same rate (8.6667 weeks for each 10 years of service) and can be taken once the employee has completed at least another 5 years of continuous service.
• Casual and regular part-time employees can qualify, with their leave based on the ordinary hours they actually worked.

An employee with at least 7 years (but less than 10) of continuous service is entitled to a pro-rata payment when their employment ends if they die, resign because of illness or a domestic or other pressing necessity, or are dismissed because of illness, for a reason other than their conduct, capacity or performance, or unfairly.

If you and your employee can't agree on when leave will be taken, you can give at least 3 months' written notice requiring them to take at least 4 weeks of long service leave. Long service leave can be cashed out only if an industrial instrument allows it and you both sign an agreement, or if the Queensland Industrial Relations Commission orders it on compassionate or financial hardship grounds.

Need help working out long service leave for an employee? Call our 24/7 HR advice line on 1300 144 002 for free initial advice.

Who is eligible for long service leave?‍

Generally, long-term employees who have maintained continuous service with the same employer for a specified period (often 7 or 10 years) are eligible. However, eligibility requirements and specifics can vary from state to state.

How much long service leave does an employee get?‍

Entitlement amounts and accrual rates are specified by legislation in each state or territory. Factors like length of continuous service and specific industry agreements may impact how much leave an employee is entitled to.

Can casual employees receive long service leave?‍

Yes, in most states and territories long-term casual employees are eligible for long service leave benefits provided they meet the continuous service requirements.

Can an employee be forced to take long service leave?‍

In some instances, employers may direct an employee to take long service leave under specific conditions outlined in relevant legislation or awards.

Can an employee work while on long service leave?‍

Generally, long service leave is intended as a period of rest and leave from work. However, under limited circumstances and within specific legislative frameworks, some jurisdictions may permit an employee to work while on long service leave.

What notice is required before taking long service leave?‍

Each state/territory and specific awards may outline distinct notice requirements. It's essential for both employers and employees to understand the rules in their location to ensure a smooth process.

Is long service leave paid at the employee's normal rate?‍

Typically, long service leave is paid at the employee's usual base rate for their regular working hours.

Is superannuation payable on long service leave?‍

Employer obligations regarding superannuation on long service leave payments can vary. It's vital to check with the Australian Taxation Office (ATO) for the most up-to-date information and requirements relevant to your jurisdiction.

How is long service leave taxed?‍

Long service leave payments are treated as income for tax purposes. There may be specific calculations or concessions –always consult the ATO or a tax professional for guidance.

What is pro-rata long service leave?‍

In some states/territories, employees leaving before accumulating the full qualifying period may be eligible for a pro-rata long service leave payout based on their accrued entitlement. Conditions differ between jurisdictions.

Can long service leave be cashed out?‍

Circumstances where cashing out accumulated long service leave is permitted vary significantly across states and territories. It's often highly limited, and may only be allowed under specific scenarios or with explicit agreements in place.

What happens to long service leave when employment ends?‍

Upon termination, accumulated long service leave (including any pro-rata amounts depending on your state/territory) must be paid out to the employee.

What records do I need to keep relating to long service leave?‍

Maintaining thorough and accurate employee records documenting service commencement, continuous service history, and leave accrual is vital. The Fair Work Ombudsman provides resources detailing legal record-keeping requirements for employers.