Does Long Service Leave Include Leave Loading? Employer’s Guide

Getting long service leave (LSL) right matters - for your team’s trust and to avoid backpay and penalties. One question trips up many employers: does long service leave include leave loading in Australia?

In this guide, we’ll clarify when (and if) loading applies, how LSL is calculated across different States and Territories, how to work out the correct pay rate for full-time, part-time and casual staff, and practical steps to stay compliant.

You’ll come away with a clear, employer-friendly checklist you can use with confidence.

What Is Long Service Leave In Australia?

Long service leave is a paid entitlement that rewards employees for extended, continuous service with the same employer. While the concept is national, LSL rules come from State and Territory legislation, so the eligibility thresholds, accrual rates, and calculation methods differ slightly depending on where the employee is based.

As a broad guide, employees typically qualify after 7–10 years of continuous service, with a further accrual for additional years. Most jurisdictions also recognise pro‑rata entitlements in certain circumstances (for example, on termination after a qualifying period).

Part-time and many casual employees can accrue LSL on a pro‑rata basis. The entitlement is generally calculated using average ordinary hours over a defined lookback period in the relevant Act.

If you’re unsure about the numbers for your workplace, it’s helpful to run scenarios through a simple tool like a long service leave calculator before you process payroll.

Does Long Service Leave Include Leave Loading?

The short answer for most employers is no - long service leave generally does not include leave loading.

Annual leave loading (often 17.5%) is not set by the National Employment Standards (NES). It arises under modern awards, enterprise agreements, or individual employment contracts. By contrast, LSL is governed by State and Territory LSL legislation, and those laws do not usually require leave loading to be added to LSL payments.

What does this mean in practice? You only pay loading on LSL if an applicable award, enterprise agreement or employment contract expressly provides for it.

Annual Leave Loading vs LSL

Loading is designed to compensate for the loss of overtime or penalty earnings while an employee is on annual leave. That concept doesn’t automatically carry across to LSL. If you need a refresher on how annual leave loading works, see our plain‑English explainer on annual leave loading.

When Can There Be Exceptions?

Two main situations can change the default:

• An award or enterprise agreement specifically states that LSL attracts loading (rare, but possible, particularly in legacy instruments).
• An employment contract clearly provides higher or additional LSL benefits, which could include a clause that adds loading to LSL.

If your industrial instrument and contracts are silent, the default position under the legislation in your State or Territory applies - typically LSL is paid at the relevant ordinary rate, without loading.

What Rate Is Long Service Leave Paid At?

LSL is generally paid at the employee’s ordinary pay for their ordinary hours at the time the leave is taken (or at termination, if paid out). The exact method can vary by jurisdiction, but these principles are common:

• Ordinary rate for ordinary hours: Pay the base rate (excluding overtime). In some jurisdictions, certain all‑purpose allowances that form part of ordinary pay may be included.
• Averaging where hours or pay vary: If the employee’s hours or rate have fluctuated, the legislation may require you to calculate an average over a specified period (for example, 12 months, 52 weeks, or another period set out in the Act), sometimes using the higher of two methods to avoid disadvantaging the employee.
• What’s usually excluded: Penalty rates, overtime, bonuses and separate loadings are typically not included in the LSL rate unless an award, enterprise agreement or contract says otherwise.

In some industries (for example, construction or contract cleaning), portable long service leave schemes apply. Those schemes can set their own calculation methods, so always check the rules that apply to your workforce.

How Do You Calculate LSL For Full‑Time, Part‑Time And Casual Employees?

Employees on different work patterns can still be entitled to LSL - the key is using the correct hours and rate inputs for each category.

Full‑Time Employees

For full‑timers with stable hours and pay, LSL is typically paid at the current ordinary rate for ordinary hours at the time of taking leave.

Part‑Time Employees

Part‑time employees generally accrue LSL on a pro‑rata basis. If their hours have changed over time, you’ll usually need to apply the averaging rules in your local Act to determine the correct weekly entitlement and pay rate.

Casual Employees

Many jurisdictions recognise LSL for casuals based on continuous service and average ordinary hours (casual loadings are usually not included in the LSL pay rate unless required by an instrument). Averaging provisions are especially important where rosters fluctuate.

Working through tricky patterns, terminations or backpay? It’s often worth getting tailored guidance from an employment lawyer so you can process entitlements confidently and keep clean records.

Compliance Checklist: Getting LSL And Loading Right

Here’s a practical checklist you can use before paying LSL or setting your policy.

1) Identify Which Law Applies

• Confirm the employee’s primary work location and the relevant State/Territory LSL legislation.
• If your industry has a portable LSL scheme, verify the scheme rules and your registration status.

2) Review Your Instruments And Contracts

• Check the applicable modern award or enterprise agreement for any LSL clauses, including whether loading is expressly payable on LSL.
• Review the employee’s Employment Contract to confirm how LSL is addressed and whether any above‑minimum benefits apply.

3) Choose The Correct Rate And Hours

• Apply the ordinary rate for ordinary hours unless your instrument or legislation requires a different method.
• Use averaging rules where hours or pay have varied, and keep the calculation notes on file.

4) Process Payments And Payslips Clearly

• Show LSL taken and paid as separate line items so employees can see how you calculated their entitlement.
• If the entitlement is paid out on termination, align with your usual offboarding workflow and the guide to calculating final pay.

5) Document Your Policy

• Keep an internal LSL procedure and communicate it in your handbook so there’s no confusion about loading and rates.
• If you’re updating or rolling out new policies, our Staff Handbook bundle is designed to make that process straightforward.

These steps help prevent disputes and demonstrate you’ve taken reasonable care - which can be crucial if you’re ever audited or a claim arises.

Common Questions On LSL And Leave Loading

Is Leave Loading Paid On LSL When Employment Ends?

Usually no, unless an award, enterprise agreement or contract explicitly requires loading on LSL. The general approach at termination is to pay out any due LSL according to the State/Territory legislation and your instrument, without loading.

If a long‑serving employee resigns or is made redundant, it’s sensible to check both the legislation and the instrument before processing any LSL payout on resignation to confirm you’re using the correct method and period for averaging.

Do Penalty Rates Or Overtime Count In LSL?

Generally no. LSL is paid at the ordinary rate for ordinary hours. Penalties, overtime and most bonuses are typically excluded unless an instrument or contract specifically includes them or an allowance is treated as part of ordinary pay under the relevant legislation.

What If The Employee’s Rate Changed Recently?

Most Acts include protections to ensure employees aren’t disadvantaged by a late pay cut or reduced hours. Often you’ll compare the current ordinary rate to an average over a set period (for example, the last 12 months) and pay whichever results in the higher figure, subject to the Act’s wording.

Should We Spell Out Our Policy On Loading?

Yes. Clarity helps everyone. Confirm the position in your Employment Contract and your handbook so employees know exactly how LSL is calculated in your business. Plain English clauses reduce misunderstandings and speed up payroll processing.

How Does LSL Interact With Other Leave?

LSL is separate from annual leave. If you’re thinking about annual leave entitlements (including loading) around the same time, keep those calculations distinct and refer back to your award, agreement and our quick guide to annual leave loading.

Key Takeaways

• Long service leave is governed by State/Territory laws and usually does not include leave loading.
• Only add loading to LSL if your modern award, enterprise agreement or employment contract clearly says so.
• Pay LSL at the ordinary rate for ordinary hours, using averaging rules where hours or rates have varied and including only those elements the legislation treats as ordinary pay.
• Part‑time and many casual employees can accrue LSL; use the correct averaging method for variable rosters.
• Document your approach in an Employment Contract and staff handbook, and keep transparent records to support each calculation.
• For tricky scenarios (terminations, backpay, legacy instruments), consider a quick chat with an employment lawyer before you process payroll.

If you’d like a consultation about long service leave, loading and payroll compliance, reach out to Sprintlaw at team@sprintlaw.com.au or 1800 730 617 for a free, no‑obligations chat.