7 years bad luck – long service leave changes through parliament

Employees will be entitled to take long service leave after seven years’ service under amendments to the Long Service Leave Act 1992 (Vic). The amendments to this legislation impact the long service leave liabilities of businesses operating in Victoria.

The amendments include:

1. when employees can take long service leave;
2. the effect parental leave will have on an employee’s total service for the purposes of calculating long service leave; and
3. calculating service for the purposes of the entitlement for employees with no fixed ordinary time rate.

Directions to take excessive leave?

The taking of long service leave will operate in a similar manner to annual leave. This means an employer cannot refuse an employee’s request to take long service leave unless it has reasonable business grounds for doing so.

Employers however can breathe a sigh of relief, as the legislation retains the ability for employers to direct employees to take periods of long service leave in specific circumstances.

Parental leave as service

Unpaid parental leave, of up to 52 weeks, or longer if agreed between the employee and employer, will be included when calculating an employee’s period of continuous service.

This will be a significant departure from the previous iteration of the legislation which did not include periods of unpaid parental leave when calculating periods of continuous service. This could have broad implications on employers’ leave debts where businesses have had multiple employees take periods of parental leave.

Periods of leave

The previous iteration of the legislation has provided that employees could take long service leave in up to three periods. The amendments state that an employee may request long service leave for a period of as little as one day. This will provide greater flexibility to the taking of leave and may result in accrued long service leave effectively operating in a similar manner to annual leave.

A change to the calculation of ordinary pay

Traditionally, where an employee has not had a fixed ordinary time rate, their notional ordinary time rate for the purposes of calculating a long service leave entitlement was calculated based on the greater of either:

1. the average weekly rate earned in the 52 weeks immediately before the employee starts the long service leave; or
2. the average weekly rate earned in the 260 weeks immediately before the employee starts long service leave.

With the amendments, a third method is provided for the calculation of an employee’s notional wage – namely, the average weekly rate earned during the employee’s entire period of continuous service with the employer – providing employees with a further potentially more beneficial method for the calculation of their ordinary time rate.

What about employees that have worked before the amendments?

Importantly for employers, the amendments will apply to service that an employee has already accrued. This means an employee, who has seven years’ service as at the date of the amendments taking effect, will have an entitlement to take long service leave at 1/60^th of their total service.

What impact will this have on your business?

Ensuring compliance with the amended legislation will be important to avoid contravention of the amended Long Service Leave Act 1992 (Vic).

Given changes to the manner in which continuous service may be calculated businesses should be cautious to ensure they have accurately ascertained their employees’ leave accrual to ensure that leave debts and accrual are appropriately managed to minimise the impact upon operations.

To ensure your compliance with these amendments or if you have any queries on how these amendments could impact your business, please contact our Employment, Safety and Migration team.

This article was written by Will Marshall, Senior Associate – Employment, Safety and Migration.