How well do you understand Long Service Leave (LSL) entitlements, and how can you best manage them?

Throughout an employee’s employment, an employee will need to take leave from the business for a range of different reasons. There are various leave types, with different entitlements and accessibility, which employers and prospective employers need to understand to meet legal obligations. Long Service Leave is no exception. 

Note, this article is in reference to Victorian businesses.  Employers outside of Victoria can contact the long service leave agency in your state or territory:

• • ACT – WorkSafe ACT
  • NSW – NSW Industrial Relations
  • NT – NT Government
  • Qld – Queensland Industrial Relations
  • SA – SafeWork SA
  • Tas. – WorkSafe Tasmania
  • Vic. – Wage Inspectorate Victoria
  • WA – Department of Mines, Industry Regulation and Safety

What is the purpose of Long Service Leave?

Let’s first start by understanding the purpose of leave. Leave is time allowed away from work, generally requested in writing, by an employee to cover special circumstances occurring in the employee’s life, including resting and recharging to look after their physical, mental, and emotional well-being. 

Long Service Leave is, as the name suggests, leave that an employee can take for providing a long period of service to their employer. 

LSL offers paid leave entitlements that can be taken at full or half pay and accessed on a pro-rata basis after seven (7) years of service. There are a few other key differences, so let’s take a closer look.

Which legislation covers Long Service Leave?

LSL is covered by the Victorian Long Service Leave Act 2018. Unlike other leave entitlements and employment conditions, which are covered by an applicable award, enterprise agreement, and other registered agreements. 

Who does the Long Service Leave Act 2018 apply to?

The Long Service Leave Act 2018 applies to Victorian employees, excluding employees under some Commonwealth enterprise agreements and pre-reform awards and other Victorian laws. It covers full-time, part-time, casual, seasonal, and fixed-term employment types and includes employees under specific labor hire arrangements.

Who does the Act not apply to?

The Long Service Leave Act 2018 may not apply to employees covered by a federal award or workplace agreement – individual or collective – where that award or agreement contains its own Long Service Leave provisions.

The Long Service Leave Act 2018 does not apply to employees who have their long service entitlement provided by another act or regulation – such as workers in building and construction, where the CoINVEST scheme provides it.

To determine whether an award or agreement applies instead of the LSL Act 2018, you can call the Fair Work Ombudsman on 13 13 94.

When does an employee become entitled?

An employee will be entitled to take LSL after completing a minimum of seven (7) years of continuous employment with one employer. They will have access to pro rata entitlement based on years of service and hours worked. Be sure to check minimum entitlements if not in Victoria, as it can be different. 

Understanding continuous employment

Continuous employment refers to when an employee has either attended work in line with their employment contract or accessed all forms of paid leave for accrual towards LSL entitlements. Examples of applicable leave include annual leave, carer’s leave, paid and unpaid parental leave, and long service leave.

Unpaid leave exceeding 52 weeks will not count unless:

• • The period of absence is taken to be a period of employment in accordance with the relevant written or oral employment agreement,
  • The employee and employer agree in writing before the leave is taken that the leave taken is to be considered a period of employment,
  • The leave taken is because of illness or injury, and
  • Is any other form of leave provided for in the relevant written or oral employment agreement.

Portable Long Service Leave

In some Australian states, legislation provides for employees in the security, community services, building and construction, coal mining, and contract cleaning industries with access to portable long service leave.

For portable long service leave in the:

• • security and community services industries in Victoria go to Portable long service
  • building and construction industry go to AusLeave
  • coal mining industry go to Coal Mining Industry LSL Funding Corporation
  • contract cleaning industry go to:
    • ACT – ACT Leave
    • NSW – New South Wales Long Service
    • Queensland – QLeave
    • Victoria – Portable long service

How to apply for Long Service Leave?

As a business, you should decide how employees can apply for leave and what notice period is required. 

It is helpful to provide employees with an overview of leave, including:

• • leave types and entitlements,
  • how much leave they can take at any one time, and
  • if there are certain times they cannot take leave based on how your business operates. 

For example, your business may have a shutdown period over Christmas/New Year.  Employees need to understand this and know about their accruals and your procedure for negative or unpaid leave in relation to this period. 

Employees can take LSL in minimum periods of one day at a time and should apply with written notice in a reasonable timeframe (as outlined by the business). Leave can be taken at full or half pay.

Unlike annual leave, employees are unable to cash out Long Service Leave, and employers are unable to require employees to take Long Service Leave to manage excess leave entitlements.

How do you calculate Long Service Leave entitlements?

To calculate LSL entitlements, you will first need to identify ordinary hours and calculate average hours over a set period of time. 

Ordinary hours will take into account if an employee may have moved between full-time, part-time, or casual employment, or vice versa. 

Average hours under the 1992 Act are where an employee’s hours of work were not fixed or their hours of work changed at least once in the 12 months before leave was taken, the employee’s hours of work were averaged.

The employee will be entitled to the greatest of the three averages, and any periods of unpaid leave are to be excluded from the averaging exercise:

• • The average weekly number of hours worked in the 52 weeks (1 Year) immediately before the employee starts long service leave.
  • The average weekly number of hours worked in the 260 weeks (5 Years) immediately before the employee starts long service leave.
  • The average weekly hours they worked during the employee’s entire period of continuous employment with the employer.

Working somewhere else while on Long Service Leave

An employee cannot take LSL from one place of employment to gain employment at another place. However, if they are already employed by two places of employment, an employee can take leave from one position and work at another.

What happens when someone resigns?

After a minimum of seven (7) years of continuous employment, when processing an employee’s final pay, regardless of why the employment ended, some leave entitlements, including any unused LSL, need to be paid out. The amount is to be paid in full on the final day of employment at the employee’s current rate of pay.

Managing Long Service Leave 

Once you have at least one employee eligible for LSL, it can be helpful to start planning what you will do during periods of leave. Things that you need to consider are:

• • Leave Liability – ensuring you have enough money set aside to pay for the leave period. Employees will be entitled to paid leave at their current rate of pay (even though they will have accrued the leave throughout their employment and at lower rates).
  • Maintaining records – leave balances need to be calculated and shown on payslips. Requests for leave should be received in writing and saved on an employee file or in an electronic payroll system / employee self-service. 
  • Update documentation – to communicate the entitlement, accessibility, and expectations around Long Service Leave, create or review and implement any policies or handbooks on Long Service Leave.
  • Coverage – It is helpful to have a plan for when an employee applies for leave and how you will cover their period of leave. The plan might differ depending on the length of time or the position they hold. It might include a combination of sharing the workload amongst your current workforce, utilising a casual workforce, or outsourcing the work.

Whatever your business situation, it is essential to understand your employees’ leave entitlements and correctly accrue and pay their entitlements. Talk to us at Small Business Society for assistance in navigating Long Service Leave for your employees. 

 

The information provided in this document is for your guidance only and is general in nature. It does not constitute as legal advice. It is the responsibility of the individual to seek legal advice where required.

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