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Long service leave – national system employers

By CCIWA Editor 

Long service leave (LSL) is leave granted with pay to employees after they complete a defined period of employment or service with their employer.

Which LSL conditions apply to employees employed in companies that are national system employers?

National System Employers are companies that are both incorporated and defined as trading, financial or foreign corporations under Section 51(xx) of the Constitution and that are formed within the limits of the Commonwealth.

Effective from 1 January 2010 the Fair Work Act 2009 introduced the National Employment Standards (NES) for all constitutional corporations, which detail provisions for LSL.

The following summarises the operation of LSL entitlements under the Fair Work Act 2009 (FW Act) in Western Australia:

  • In general, if your employees were bound by a pre-reform award prior to the commencement of the NES, then the LSL entitlements in that award are preserved and continue to operate.
  • If your employees were bound by a Notional Agreement preserving a State Award (NAPSA) prior to the commencement of the NES, then the State LSL provisions will generally apply. Notwithstanding this there are a number of exceptions.  It is strongly recommended members contact CCI’s Employee Relations Advice Centre for guidance on this point.
  • If your agreement prior to the commencement of the NES contains LSL entitlements then generally those entitlements are preserved and continue to operate.
  • If your employees do not have award or agreement derived LSL entitlements then the State LSL provisions will apply. In Western Australia, the key LSL Act is the Long Service Leave Act (WA) 1958.

Different conditions apply depending on the circumstances of each employer and group of employees.

Employers may wish to seek advice on their specific circumstances but the most common situations are outlined below.

Construction industry employees are covered by the Construction Industry Portable Long Service Leave Act 1985.

Local government employees are covered by the Local Government (Long Service Leave) Regulations.

Service vs continuity

The key condition that qualifies an employee for LSL is a period of continuous service or continuous employment.

“Service” or “employment” is the time during a contract of employment that is counted for the purpose of determining an employee’s entitlement to LSL (i.e. time spent working or on paid leave or on military service or on jury duty).

“Continuity” refers to the unbroken period of service or employment for which the employee earns an entitlement to LSL.

Service or employment and continuity must be considered together to determine an employee’s entitlement to LSL. Some events will not be counted as service or employment for LSL calculations. For example, an employee could be continuously employed for an unbroken period of 11 years but have accrued only 10 years of LSL due to periods of time that did not count as employment in accordance with the LSL Act (e.g. the employee may have taken one years’ unpaid parental leave).

Transfer of business and LSL

Where a business is sold and some or all of the employees of the previous owner transfer to the new owner, for the purpose of LSL their service will not be broken.

In calculating the entitlement to LSL where transfer of business has occurred, the sum of the time served with the previous owner and the time served with the new owner will be deemed to be one continuous period with the service commencing from the day the employee began employment with the original owner of the business.

Casual and part-time employees

Casual and part-time employees are entitled to LSL provided their service or employment with the employer has been continuous.

For casual employee, continuous service or employment does not necessarily mean an unbroken period of service.

A series of employment periods (or employment contracts) could be deemed continuous service, provided the employee was available to work when rostered over the whole qualifying period.

Contracting out of LSL

Section 5 of the Long Service Leave Act (WA) 1958 provides that via agreement between an employer and an employee, the employee may forego an entitlement to LSL on the condition the employee is given an adequate benefit in lieu of the entitlement and the agreement is in writing.

Unless there are specific provisions in the award or industrial agreement the ability to contract out of LSL only applies to entitlements accrued under this Act.

Summary of entitlements

Employers are advised to seek further information when granting or making payments in lieu of LSL.

Long Service Leave Act 1958
First entitlement 8 2/3 weeks after 10 years continuous service.
Subsequent entitlements 4 1/3 weeks after 5 years continuous service.
Rate of pay (waged/salaried etc) At the ordinary rate applicable at the time leave commences. Excludes shift premiums, overtime, penalty rates, allowances or the like.
Rate of pay (where employee is employed on piece or bonus work or any other system of payment by results) Number of hours to be paid The ordinary rate payable shall be determined by averaging the weekly rate earned in the previous 12 months. Normal weekly number of hours of work. Where weekly hours over the period of employment have varied, the “normal weekly hours” are determined by averaging the weekly hours worked during the entire period of employment.
Payment to be made At the same time payment is made in the normal course of employment, unless the employee requested in writing to be paid before leave begins, in which case the employer must comply.
When leave must be taken Subject to any agreement between employer and employee, as soon as “reasonably practicable” after it becomes due. If employer and employee can’t agree, where the employee has accrued LSL more than 12 months ago, the employer is not to refuse the employee taking the leave at any time suitable to the employee.
Separate periods One continuous period of if by agreement, in separate periods of not less than one week.
Notice required Postponement of leave By agreement or by the employee giving the employer at least two week’s notice. Where by agreement LSL is postponed to meet the employee’s convenience, the rate of pay for such leave shall be the rate applicable to the date of accrual (unless employer agrees to pay the rate applicable when the leave is taken).
Leave in advance Is allowed by agreement. If sufficient leave is not subsequently accrued upon termination of employment, the employer may make a deduction equivalent to the LSL granted in advance, from monies owing to the employee on termination.
Payment in lieu on termination Pro rata leave is paid upon death or termination after at least seven years continuous service (except for serious misconduct) in accordance with the following:

  • Where at least seven years continuous service has been completed but less than 10, proportionate LSL is payable and is calculated on completed years, months and days of service with the employer.
  • Where more than 10 years of continuous service has been completed, LSL is payable pro-rata on fully completed years of service only.
Termination for serious misconduct Forfeiture of accrued pro rata leave.
Public holidays Here the conditions of employment provide an entitlement to public holidays and a public holiday falls during a period of LSL, the LSL shall be increased by one day for each public holiday falling within that period. Annual leave which may fall due during LSL is not absorbed.
Other work Employee not permitted to engage in other employment while on LSL otherwise the right to the remaining leave is forfeited.
Contracting out Employer and employee may agree (in writing) that the employee forego his or her entitlement to LSL if the employee is given an “adequate benefit in lieu of entitlement”.
Exclusions Where an award, enterprise or workplace agreement, state or federal laws or other agreement between employee and employer provides an LSL entitlement “at least equivalent” to the LSL Act, the LSL Act does not apply at all.
Interruptions that:

  • count as service
  • don’t break continuity
  • transfer of business
  • absence on annual leave, LSL, public holidays
  • absence due to sickness or injury up to 15 working days in any year
  • termination by employer to avoid obligations
  •  military service as defined
Interruptions that:

  • don’t count as service
  • don’t break employment or continuity
  • authorised absence
  • standing down as per award
  • termination (other than for slackness of trade) if re-employed within two months
  • termination (for slackness of trade) if re-employed within six months
  • reasonable absence for legitimate union business where requested but been refused

 

For further information please contact CCIWA’s Employee Relations Advice Centre on (08) 9365 7660 or email advice@cciwa.com.

Long service leave (LSL) is leave granted with pay to employees after they complete a defined period of employment or service with their employer.

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