In the past, Australian workers became eligible for LSL through Commonwealth and State or Territory legislation. However, over the last 20 years, there has been a shift towards increasing the role of enterprise bargaining in industrial relations, while reducing the reliance on Modern Awards. Accordingly, several minimum standards previously captured within Awards now appear within statutory safety nets (e.g., the National Employment Standards). Even though LSL entitlements are protected as a National Employment Standard (NES), no uniform national LSL entitlement exists. Instead, entitlements vary from state to state, between industries, and from employer to employer. These varying entitlements leave employers grappling with a complex system and are consequently vulnerable to non-compliance.
For example, EAs covering Victorian nurses contain up to five entitlements and accrual methods for LSL. Employees can accrue LSL differently depending on everything from employment status, qualification, and position classification.
Other EAs operate hybrid arrangements that consider state-based legislation and negotiated entitlements to LSL (developed and bargained over time with employees and their Union) – See Tomago Aluminium Maintenance/ Trades Enterprise Agreement 2018.
Adding to this love triangle are various state-based portable long-service leave schemes. These schemes provide leave to a worker for service to a particular industry rather than continuous service to one employer. Portable Long Service Leave schemes in these industries allow employees to continue earning LSL benefits even when they change employers or move interstate.
Different entitlements and rules for LSL throughout Australia and across occupations create confusion, particularly for businesses operating across various states or with multiple enterprise agreements.
With the Federal Government’s proposed wage theft legislation on the horizon, now is the time for employers to address their compliance concerns. Yellow Canary can help take the stress out of workforce compliance.
* Yellow Canary content on this website is intended solely for the purpose of offering commentary and general knowledge. The content is not intended to constitute legal advice. You should seek legal or other professional advice before acting or relying on any of the content.
Long service leave (LSL) calculations are complex. Compliance relies upon interactions between industrial instruments (awards and EAs), the National Employment Standards (NES), and state-based legislation. Often the onus is on payroll staff to source this information themselves and interpret the competing expectations.
Our two-part series is all about helping employers to understand the complexities of LSL. We want you to feel more confident identifying common gaps when assessing LSL compliance, as well as the key pieces of legislation guiding this process.
For permanent employees with consistent hours, LSL is not all that different to an annual leave or personal leave entitlement accrual. However, the complexity lies where there is variation in hours, in shift patterns, or employment types throughout an employee’s tenure.
Employees taking LSL
Milestones that define when an employee is eligible to take their long service leave vary from state to state – it could be 7 or 10 years. There are more variables to consider on top of the key eligibility date – if LSL continues to accrue, or if employees must hit another employment milestone to acquire more leave. If an employee resigns or is made redundant can change the payments owed, too.
Payroll: Hours vs. value
LSL is accrued in weeks as opposed to hours, giving the entitlement a value sum. This means that most payroll systems are not able to have an accurate accrual. Instead, there is an estimation of the equivalent hours to ensure a balance is reflected in accounting systems and for employees to gauge their entitlements.
The value of this LSL is then calculated using averages of earnings over different milestones and uses various aspects of an employee's pay. How is this complex sum calculated? It’s based on an employee’s state, or most likely the state in which they are employed in at the time, but let’s not get into the weeds of this for now!
Problems with payroll systems
Payroll and accounting systems need to hold a value for LSL entitlements and the current systems on the market vary in accuracy for this. To add to this, the value of these individual entitlements can change dramatically during an employee’s lifecycle. The complexity lies in the calculations that need to be dynamic for compliance balanced against businesses needing values and balances for reporting purposes to ensure entitlements are accurately reflected.
For employers who have yet to assess their organisation’s LSL compliance, the time to do so is now. Whether you engage with solutions such as ours, or simply begin examining how well equipped your teams are to handle your organisation’s LSL compliance risk, those who take action will find themselves in a significantly more secure position in the future.
Check out part 2 of the complexities of Long Service Leave to understand the complex relationship between LSL and employment agreements, and differences between state-based LSL legislations.
*Yellow Canary content on this website is intended solely for the purpose of offering commentary and general knowledge. The content is not intended to constitute legal advice. You should seek legal or other professional advice before acting or relying on any of the content.
In part 1 of our LSL complexities series, we covered LSL in payroll, employees taking LSL, and problems with payroll systems. Hopefully, you enter this segment understanding some of the key complications involved in LSL calculations.
Today, we will be discussing differing state legislation and how they affect LSL calculations, as well as the relationship between LSL legislation and instruments (such as awards or enterprise agreements).
State LSL legislation
LSL is one of the 11 National Employee Standards that form the minimum entitlements that must be provided to each employee. However, each state and territory across Australia has different rules around LSL that are outlined in their respective regulations (Acts). The rules vary between the amount of time off work an employee can have, the rate at which the leave is paid, how to calculate that rate, and what LSL is paid when an employee is leaving their employer (this can be different depending on the reason the employee leaves their employment). Other considerations between each state are:
- Can an employee cash out LSL in the state they work in?
- How do bonus and commission payments get calculated, if at all?
- What are the rules of break-in-service, does the break mean the LSL starts again?
- Can the employee take the leave at any time and what amount of leave?
- When calculating the rate of LSL, how far back in the employee's history do you need to look? (Tip: in some states you need to look at the full employment history)
Details on the rule per state or territory can be found in below links:
- New South Wales – Long Service Leave Act 1955
- Victoria – Long Service Leave Act 2018
- Queensland – Industrial Relations Act 2016
- 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 1981
- Australian Capital Territory – Long Service Leave Act 1976
Relationship between legislation and instrument
Another level of complexity with LSL is the relationship between state LSL legislation and the award or agreement the employee works under. It can be challenging to navigate which rules are applied to certain cohorts of employees. If you have any questions on what rules would reign supreme for your employees' LSL entitlements, it is always best to seek legal advice.
As we’ve shown over this series, LSL can be a complex beast if you’re tackling it without support or proper resources. LSL calculations do not have to cause you stress if you’re listening to the right people or utilising the right technology to support compliance.
The increasing public scrutiny of underpayments by large businesses has made reputation risk management a top priority for boards. These underpayment cases often reveal broader systemic issues with far-reaching financial implications, and LSL looms as the next flash point, should businesses not act soon.
The complexities associated with LSL compliance have motivated Yellow Canary to develop a Long Service Leave compliance tool that automates compliance reviews, calculating LSL balances and payments according to state legislation and enterprise agreements.
*Yellow Canary content on this website is intended solely for the purpose of offering commentary and general knowledge. The content is not intended to constitute legal advice. You should seek legal or other professional advice before acting or relying on any of the content.
