Long service leave (LSL) is a reward to an employee as a recognition of their continued services in a particular industry. LSL is accumulated over an extended amount of period. Each State and Territory in Australia sets out how much LSL the employee is entitled to and when they are entitled to receive the LSL.
In this article, we explain what long service leave is, how much employees get and answer some commonly asked questions.
What is long service leave?
LSL is a unique employment benefit in Australia that rewards employees for their extended and loyal service to an employer. It provides an entitlement to an extended period of leave after a specified period of continuous service. This benefit is distinct from other types of leave, such as annual leave or personal leave.
How much long service leave do employees get?
The entitlement to long service leave varies across different States and Territories in Australia. LSL is regulated by State or Territory legislation, and in some cases, a Federal industrial instrument. Here is a summary of the core LSL entitlements in various jurisdictions:
- New South Wales generally grants 2 months’ leave after 10 years of continuous service, with pro-rata access after 5 years.
- In Victoria an amount equal to 1/60th of the employee’s total period of continuous employment after 7 years.
- Employees in the Northern Territory and South Australia are entitled to 13 weeks of leave after 10 years, with pro-rata entitlement after 7 years.
- The Australian Capital Territory grants 1.4 months’ leave (6.06 weeks) after 7 years, with pro-rata entitlement after 5 years.
- Queensland employees are entitled to 8.6667 weeks of leave after 10 years, with pro-rata entitlement after 7 years.
- Both Western Australia and Tasmania have 8.667 weeks’ leave after 10 years, with pro-rata entitlement after 7 years and more favourable entitlements for mining industry employees.
When can employees take long service leave?
Threshold requirement for long service leave
In order to qualify for LSL, employees typically need to fulfil a continuous service requirement, which is usually a specified period (e.g., 7 years or, 10 years) with the same employer.
Pro rata long service leave
All jurisdictions provide provisions for the pay-out of LSL in the event of termination of employment. In such circumstances, employees are entitled to pro rata long service leave if they cease employment before reaching the full qualifying period under specific regulations of the State.
However certain Jurisdictions in Australia will allow employees to end their employment terms under circumstances such as illness or injury. Under such circumstances, the employee may be entitled to pro rata LSL.
Do employees transferring between related companies continue to accrue long service leave?
LSL provisions may recognise continuous service even when an employee transfers between related entities or undergoes a change in the employing entity. However, this may differ between the states and territories.
Transferring employees from overseas related companies.
This rule also applies where Australian employees are first employed in Australia, are transferred to a related overseas company and return to Australia. The period for which they were employed by the overseas company will also be included in calculating long service leave. A decision of the Industrial Magistrates Court of Western Australia in the case of Martin Venier v Baker Hughes Australia Pty Ltd demonstrates this principle.
Mr Venier was employed by Barker Hughes and its related body corporate from November 1988 to July 2015. During this time, he worked under various departments and related body corporate in and outside of Australia. Mr Venier claimed he was entitled to 23.01 weeks’ of LSL due to the 26.64 years of continuous services Barker Hughes and its related body corporate. Despite the argument from Barker Hughes that Mr Venier invoked his right to LSL due to not reaching the 7 years threshold this failed.
The Magistrates Court found that the phrase ‘continuous employment with one and the same employer’ under s 8(1) of the LSL Act would incorporate the basis that s 50 of the Corporations Act (Cth) as a body corporate falls within the meaning of ‘one and the same employer’ under s 8(1). Therefore, in Western Australia, it is recognised that employees’ prior services to related body corporates which are outside or inside of the State will be included in the calculation of LSL.
Importantly other States and Territories in Australia recognise that employment to a related body corporate is to be calculated into the LSL entitlement. The state of Queensland and the Northern Territory have incorporated the definition of the Corporations Act (Cth) of ‘related body corporate’ into their legislation. In New South Wales and Victoria, relevant legislation provides that prior service with an associated body corporate will count as service with the current employer. South Australia has adopted a broader definition. However, it is important to note that none of the States and Territory expressly deal with the issues of overseas transfer.
Companies and organisations should be aware of this when dealing with a transferring employee between Australian companies and associated related body corporate overseas, as the employees’ services overseas may be calculated towards the employee’s continuous sieved from the purpose of their LSL.
Can employees cash out long service?
LSL cannot be cashed out. There are no provisions under State and Territory law that provide for the entitlement of ‘cashing out’ LSL. However, under agreement, an employee is provided with the opportunity to take accrued long service leave.
At what rate is long service leave paid out?
In most cases, LSL will be paid out at the employee’s ordinary pay rate. The ordinary pay will be based on the employees’ pay rate for the hours at work. when the LSL is being paid out it will not include overtime house, allowance, penalties and shift loading.
- LSL is a reward for extended and loyal service
- Entitlements vary across States and Territories
- Provisions exist for pro rata leave and payout upon termination
- Considerations for continuous service apply during changes in employing entities or jurisdictions
Case law examples of long service leave
The case of Wipro Limited v State of NSW has redefined the entitlement to LSL where individuals have completed work outside of a particular Jurisdiction. In this case, an employee of Wipro Limited sought to have his LSL paid out after completing 10 years of continuous employment. He worked at Wipro’s Indian entity for a total of 5 years and further worked in NSW for an additional 5 years before resigning from his employment. As he worked outside of the NSW the courts had to consider if this period of employment could be recognised. The decision of the Court of Appeal recognised the 5 year period at Wipro in India would not be included within his employment at Wipro in NSW. Since the service in India was not “substantially connected” to the work done in NSW, thereby rendering his entitlement.
This decision is important to the individual who conducted work outside of NSW for a Company within the State, whether the employment is within another Australian State or Territory or overseas, if the employee wishes to have either service outside the State to be calculated in their LSL they will have to demonstrate that the work is “substantially connected” to NSW.
The decision of Schipp v The Star Entertainment Qld Limited has provided a new perspective on LSL and how it is reviewed in the state of QLD. Mr Schipp was working as a Game Dealer employed by The Star Entertainment Qld Limited. Schipp was suffering from significant mental illness and was diagnosed with anxiety disorder. His employer terminated his employment mere days before completing the 10 years services requirement.
On the basis that he would not be able to fulfil the inherent requirements as a Games Dealer at the time and for the foreseeable future and that no reasonable accommodation would be made for his condition.
Section 95 of the Industrial Relations Act grants an employee to LSL payout resignation proportional to the 10 years’ services under specific circumstances such as; “illness or incapacity”, dismissal for a reason other than “conduct, capacity, or performance”, when the employee has been “unfairly dismissed”. It was found that Mr Schipp was not entitled to the payout because of his illness making him unable to conduct the work and, therefore, this was not a reason other than his capacity. However, it was noted that if Mr Schipp had resigned due to illness and or incapacity there would have been a potential for him to receive a partial payout.
Mr Schipp appealed the matter on the basis that it was unjust that a payout could be given out upon resignation but not dismissal. However, if an employer had a valid reason for a dismissal relating to the employee’s conduct, capacity, or performance then a partial payout may be denied. In Mr Schipp’s case, it was established there was a valid reason for dismissal as he did not have the capacity to perform in the future, the duties required pursuant to the employment contract and if the employee’s health had a significant deterioration, then it would be a valid reason for termination. Leading to the appeal being dismissed.
Frequently Asked Questions
Does long service leave get paid out on termination of employment?
Usually, unused LSL is to be paid at the end of the employment period. However, when employment ends before an employee has worked the total number of years needed to acquire their full LSL entitlement, they will get paid out a pro-rata LSL. Whether they receive this payment at the time of termination will depend on the law set out by the state or territory of work.
At what rate is long service leave paid out?
LSL is paid at an ordinary rate (which will exclude overtime) paid to the employee for the period of the leave. Employees who are being paid above their awards are required to be paid a higher rate on their LSL. Additionally, casual employees are entitled to be paid at the loaded casual hourly rate.
What is portable long service leave?
Legislation of some States and Territories in Australia provides employees in the security, community services, building and construction, coal mining, and contract cleaning industries with access to portable LSL. This means that the employee can accumulate LSL regardless of whether they are working on different projects for one or more employers.
What is ‘continuous service’?
Continuous service is understood as the length of time an employee has been employed by a business. Therefore, if employment ceases this will breach the continuous service.