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If you manage a team or run a small business in Australia, you know that getting payroll right is essential – not only for your employees’ peace of mind, but to avoid costly compliance issues down the track. One of the most common points of confusion for employers is around long service leave (LSL), and specifically: does long service leave have loading? In other words, do you need to pay leave loading on long service leave, or is LSL calculated differently than annual leave?
This guide will help you understand exactly what long service leave is, how it’s calculated for different employees (including part time workers), and – most importantly – whether or not you need to pay leave loading on long service leave in Australia. We’ll also walk through how to work out your obligations under the various state and territory laws, the typical long service leave pay rate, and practical steps to help you get compliance right.
Keep reading to ensure your business is rewarding employees fairly while avoiding common leave mistakes.
What Is Long Service Leave?
Long service leave (LSL) is a special type of paid leave that rewards employees for their continuous long-term service to the same employer. The concept has deep roots in Australia and applies to most employees across the country, regardless of whether you run a small shop, manage a busy office, or oversee a growing online venture.
The precise entitlements, accrual periods, and conditions for taking LSL can differ depending on which state or territory your business operates in, as each jurisdiction has its own legislation. However, the general principle is consistent: after a long period of service – typically 7 to 10 years – your employee earns a dedicated block of paid time off.
Employers sometimes ask if casual and part time staff accrue long service leave. In most cases, the answer is yes – LSL entitlements are pro-rata for part time and even casuals, based on their ordinary hours worked. It’s best to check your relevant award or Enterprise Agreement to confirm any additional rights.
How Much Do You Get for Long Service Leave in Australia?
The amount of long service leave an employee receives generally depends on the length of continuous service and the relevant state or territory laws. Here’s a broad national picture:
- NSW: 2 months (8.67 weeks) after 10 years’ service, with additional leave for further service.
- VIC: 6.0667 weeks after 7 years, and further leave for each additional year.
- QLD: 8.6667 weeks after 10 years.
- WA, SA, ACT, and others: Similar, but with some variations in accrual and eligibility.
The rules also set out formulas for part time and casual employees, generally based on average weekly hours worked over the relevant period. If you’re uncertain how to calculate this, check out our guide to long service leave calculators for a detailed walkthrough.
Does Long Service Leave Have Loading?
This is the question at the heart of many payroll queries: do you get loading on long service leave? Or, put another way, is leave loading paid on long service leave?
The short answer is: No, in almost all cases, leave loading does not apply to long service leave.
This is a common misconception. Leave loading – typically paid at 17.5% on annual leave – is designed to compensate employees for the loss of opportunity to earn overtime or penalty rates during their annual leave. However, long service leave is a separate entitlement with its own calculation rules, and generally, there is no requirement at law to pay leave loading on top of LSL payments.
There are some exceptions, so let’s break it down in a bit more detail below.
Annual Leave vs Long Service Leave Loading
Annual leave loading is prescribed under the National Employment Standards (NES) and many modern awards, but it is not automatically built into LSL laws at state or territory level. Legislation for long service leave in Australia – such as the NSW Long Service Leave Act 1955, the Victorian Long Service Leave Act 2018, and their interstate equivalents – generally make no mention of leave loading for LSL.
So, unless your employee’s award, enterprise agreement, or employment contract specifically includes leave loading for LSL, the default position is that it is not payable.
Are There Any Exceptions?
Exceptions can occur if an award or enterprise agreement sets out more generous terms than the minimum provided by law. For example, a handful of old awards or “enterprise agreements” (EA) might specifically provide for leave loading to be paid on long service leave.
So, as an employer, you should:
- Check relevant modern awards applicable to your staff
- Review any enterprise agreements in place
- Read individual employment contracts, especially if they use past award terms or custom clauses
If you don’t find any reference to leave loading on LSL in these documents, then you are not required to pay it. For most employers, this means long service leave is paid at the employee’s ordinary base rate, and no leave loading applies.
What Rate Is Long Service Leave Paid At?
When it comes time to pay out long service leave, you want to be sure you’re using the correct long service leave pay rate. Here’s how it’s determined in most jurisdictions:
- Ordinary Rate: LSL is usually paid at the employee’s current ordinary weekly rate at the time the leave is taken (or paid out).
- Variable Hours or Pay: Where ordinary hours or pay have changed recently, calculation can require an average (e.g. over the last 52 weeks, or as specified in the local Act).
- No Penalty, Overtime or Loading: Usually, overtime rates, penalty rates, bonuses, and loading (such as annual leave loading) are not included in the pay rate for LSL, unless the award or contract says otherwise.
In some industries (such as building and construction), industry-specific portable long service leave schemes may set out a different calculation method, so always check.
Does This Apply to Part Time and Casual Staff?
Yes, part time and many casual employees are entitled to long service leave in Australia. Their entitlement is calculated pro-rata based on their average weekly ordinary hours during the period of service.
If your employee’s hours have varied a lot, or you’re not sure how to calculate their LSL entitlement, get some direct guidance from a specialist employment lawyer or read our more comprehensive guide to LSL calculations.
How To Make Sure You’re Complying With Long Service Leave Laws
Long service leave is just one part of your wider employment law obligations, but mistakes in LSL compliance can trigger expensive backpays, penalties, or legal disputes. Here’s what you can do:
- Check Which Rules Apply: The applicable legislation depends on your state or territory. Use the Fair Work Ombudsman’s guidance or look up your state Act for a summary.
- Review Your Awards & Agreements: Does your relevant award or EA say anything about leave loading on LSL? Check and clarify anything not clear, or seek professional advice.
- Audit Payrolls: When paying out LSL, ensure the calculation uses ordinary pay and does not add loading unless your award or contract specifically says so.
- Keep Robust Records: Keep accurate records of start dates, service continuity (including any breaks), and changes in hours or pay rates. Proper records avoid disputes if an employee claims they didn’t get their full legal entitlement for long service leave.
- Get the Right Documents in Place: Ensure your Employment Agreements and Staff Handbooks clearly set out how long service leave (and annual leave loading) is treated, reducing confusion and risk of underpayment claims.
Accurate, up-to-date contracts and policies are a key part of payroll compliance. If you’re unsure whether your current documentation stacks up, you might benefit from a review of your employment contracts or a tailored staff handbook to cover long service leave and related matters.
Common Scenarios and Questions: LSL Loading, Rates, and More
Is Leave Loading Paid on LSL on Termination?
Some employers wonder if annual leave loading applies when long service leave is paid out upon termination (for example, when an employee resigns or is made redundant after a long tenure). Generally, the same rule applies: only pay leave loading on LSL if your award, EA, or contract specifically says so. There is no general legislative requirement to pay it.
How Is LSL Calculated When an Employee’s Rate Has Changed?
If your employee’s hours or pay rates have changed in the last year, you may need to calculate LSL at the higher of:
- The current ordinary rate; or
- The average weekly ordinary pay over the previous 12 months, or longer (the Act will specify the relevant period)
This ensures the employee is not disadvantaged by a recent pay drop before taking their long service leave. Always refer to the relevant state or territory Act for the precise method.
Do Penalty Rates or Overtime Count?
Not usually. For most employees, LSL is paid at the base rate, with no overtime, penalty, or loading components.
How Should LSL Be Documented?
LSL accrual and payments should be recorded clearly in employee payslips and your payroll system, specifying the rate and confirming any agreements about how it will be taken. Staff should also be able to access information on how LSL is calculated in your workplace policies or contract.
What Legal Documents Should You Have for LSL Compliance?
No matter the size of your business, documentation is key for smooth payroll and to avoid confusion about long service leave. Depending on how your workforce is set up, you may need:
- Employment Agreements: Should clearly state how LSL is accrued and (if relevant) clarify if leave loading applies to LSL or not.
- Employee Handbook or Staff Policies: Useful for summarising LSL obligations, accrual, and payout rules in plain English for your staff.
- Payslip Template: Ensure your payslips properly show LSL accrual and payments, so employees can verify their entitlement.
- Payroll Compliance Review: Regular payroll audits confirm your LSL processes and payments are up to date, and good recordkeeping protects you in case of any Fair Work disputes.
If you’re updating your documentation or unsure which contracts suit your business model, Sprintlaw’s employment contract guide is a helpful place to start. For handbook policies, our employee handbook package can ensure everything is covered for your workplace.
Key Takeaways: Does Long Service Leave Have Loading?
- Long service leave is a unique entitlement in Australia that rewards long, continuous service and applies to most workers, including part time and casual staff.
- Generally, leave loading does NOT automatically apply to long service leave – it is a separate entitlement from annual leave and has different calculation rules.
- You should only pay leave loading on LSL if your applicable award, enterprise agreement, or contract specifically provides for it.
- LSL is usually paid at the employee’s ordinary base rate; do not include overtime, penalties, bonuses, or loading unless required by another agreement.
- To avoid errors or underpayments, regularly review your awards, agreements, contracts, and state legislation – and clarify your policy in staff handbooks or payroll systems.
- Good documentation and up-to-date payroll practices help keep your business compliant and build trust with your employees.
- When in doubt, consulting a legal expert ensures you’re ticking all the compliance boxes and protecting your business from unexpected claims or penalties.
If you’d like a consultation about long service leave, payroll compliance, or updating your business contracts, reach out to Sprintlaw at team@sprintlaw.com.au or call 1800 730 617 for a free, no-obligations chat. We’re here to make employment law easy for Australian businesses.
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