How Long Service Leave Works In Victoria For Employers

If you employ staff in Victoria, long service leave (LSL) is one of those entitlements you need to get right from day one.

It applies to full-time, part-time and-importantly for many small businesses-regular and systematic casuals.

In this guide, we’ll explain how LSL works under Victoria’s Long Service Leave Act 2018 (Vic), how to calculate entitlements, what to do with requests and directions, and the practical steps to stay compliant without disrupting your operations.

We’ll keep it simple and small-business friendly, with clear actions you can take and the key rules you must follow.

What Is Long Service Leave In Victoria?

Long service leave is a paid entitlement that rewards long, continuous employment with the same employer.

In Victoria, the Long Service Leave Act 2018 (Vic) sets the minimum standard. Enterprise agreements or employment contracts can provide more generous terms, but not less.

The Core Rules (At A Glance)

• Accrual: LSL accrues progressively over time.
• Entitlement arises after 7 years: Employees can take LSL (not just be paid out) once they reach 7 years of continuous employment.
• Continuity: A broad range of paid and certain unpaid absences still count towards “continuous employment”.
• Payment rate: LSL is paid at the employee’s ordinary pay, with special averaging rules if hours or pay have varied.

As an employer, you must keep proper records, approve or direct leave in line with the Act, and pay correctly when leave is taken or employment ends.

Who Accrues Long Service Leave (Including Casuals)?

All Victorian employees accrue LSL-full-time, part-time and casual-provided they meet the Act’s continuity rules.

Full-Time And Part-Time Staff

Accrual is straightforward and continuous unless there is a genuine break in employment. Paid absences (like annual leave, paid parental leave and most paid sick leave) generally count towards continuity.

Long Service Leave For Casuals In Victoria

Long service leave for casuals in Victoria is available where the casual employment is regular and systematic and there’s a reasonable expectation of ongoing work.

If you’re wondering “how does long service leave work in Victoria for casuals?”, the same 7-year threshold applies, but you’ll assess continuity and average hours carefully to calculate the entitlement.

Breaks In Service And “Continuous Employment”

• Short breaks: Breaks of up to 12 weeks typically do not break continuity.
• Longer breaks: Some longer absences (for example, certain forms of unpaid parental leave) may still count-up to a statutory limit-though not all time on unpaid leave will accrue.
• Industrial instruments: If an enterprise agreement applies, check whether it offers more generous treatment.

Because casual patterns and unpaid absences can complicate things, it’s wise to address LSL in your Employment Contract and policies so managers know how to treat accruals and requests consistently.

How Is Long Service Leave Calculated And Paid?

In Victoria, LSL accrues at a statutory rate set by the Act. A common way to think of it is that employees accrue just under one week of LSL each year of service (roughly 0.8667 weeks per year), which means:

• At 7 years: An employee becomes entitled to take LSL (about 6.06 weeks as a guide, subject to the exact statutory formula and rounding).
• Beyond 7 years: Entitlements keep accruing, with additional leave available at later milestones (for example, around 8.67 weeks at 10 years based on the same rate).

To estimate entitlements for planning purposes, many employers find it useful to use a Long Service Leave Calculator before confirming final figures under the Act.

Ordinary Pay And Averaging Rules

LSL is paid at an employee’s “ordinary pay”. Where hours or pay have varied, the Act includes averaging methods (for example, looking back over a defined period such as 12 months or 5 years) and you must apply the method that results in the highest applicable rate for the employee.

For casuals or employees with variable rosters, calculate the average weekly hours over the relevant period and multiply by the ordinary hourly rate that applies when the leave is taken.

Minimum Periods And How Leave Can Be Taken

• Minimum period: In Victoria, LSL can be taken in periods as small as one day, by agreement.
• Flexibility: Employees may take LSL in one block or in multiple smaller blocks, subject to agreement and the operational needs of your business.

Superannuation And LSL

Superannuation on LSL taken during employment is generally payable in the same way as ordinary time earnings. Different rules can apply to LSL paid on termination, so double-check your obligations before processing final payments and refer to your Final Pay process.

Requesting, Granting And Directing Leave: What Are Your Obligations?

The Act balances the employee’s right to take leave with your need to plan rosters and staffing.

Employee Requests

• After 7 years of continuous employment, an employee can request to take LSL.
• You must not unreasonably refuse a reasonable request. If the timing would seriously impact your operations, propose a practical alternative.
• Notice: The Act requires advance notice (commonly 12 weeks), unless both parties agree to shorter notice.

Employer Directions

• As an employer, you can direct an eligible employee to take LSL with the required notice (again, often 12 weeks) if there are sound business reasons.
• In practice, most businesses agree a timing that works for both sides to avoid disruption.

Refusals And Disputes

If a dispute arises, keep records of your operational reasons, any alternatives offered and the communications with the employee. The Wage Inspectorate Victoria can enforce compliance, and civil penalties apply for breaches.

It also helps to embed a clear LSL policy inside your Staff Handbook so managers and employees understand how to request, approve and schedule LSL fairly.

Managing Changes, Transfers And Ending Employment

You’ll likely encounter LSL questions when roles change, business ownership shifts, or employment ends.

Changing Hours Or Roles

When an employee moves from full-time to part-time or casual, or their hours otherwise fluctuate, the averaging rules in the Act help ensure they’re not disadvantaged when taking LSL.

If you’re adjusting rosters for business reasons, document changes and consider the broader impact on entitlements alongside other obligations like reducing employee hours fairly.

Transfer Of Business Or Group Companies

If your business is sold or employees transfer within a group, LSL continuity can carry across in certain circumstances. Make sure you factor LSL liabilities into the sale price or transfer terms, and confirm who will assume the liability for accrued leave after completion.

When planning a restructure or acquisition, it’s worth getting advice on transfer of long service leave so you don’t inherit unexpected costs.

On Termination: Pro Rata Payouts

• 7 years or more: If employment ends after at least 7 years of continuous employment, any unused LSL is paid out pro rata.
• Less than 7 years: Generally, there’s no LSL payout (with limited exceptions such as death, where payment to the employee’s estate may apply if eligible).

Align your termination workflow, checklists and templates-letters, deeds, and payroll steps-with your termination documents so LSL is calculated correctly and paid on time with other entitlements.

Record-Keeping, Compliance And Common Pitfalls

Accurate, up-to-date records are your best defence if there’s a query about an employee’s LSL balance or eligibility-especially for long-serving casuals.

Keep Robust LSL Records

• Start and end dates of employment (including transfer of business dates).
• Work patterns and changes to hours (rosters, timesheets, classification changes).
• Leave taken and approved (including LSL and other leave).
• Breaks in service (paid and unpaid), and reasons.
• Pay records sufficient to apply the Act’s averaging rules.

Align Contracts, Policies And Rosters

Make sure your Employment Contract and policies reflect the minimum standard in Victoria. If a Modern Awards or enterprise agreement applies, ensure your approach to LSL sits consistently alongside other leave and rostering rules.

Avoid These Common Mistakes

• Assuming casuals don’t accrue LSL: In Victoria, regular and systematic casuals do.
• Refusing reasonable requests: After 7 years, you can’t unreasonably refuse LSL on reasonable notice.
• Using the wrong rate: Apply the Act’s averaging method that yields the highest applicable rate when hours or pay vary.
• Forgetting LSL in transfers: Always address LSL liabilities in a business sale or internal transfer.
• Poor records: Without clear records, you carry the risk and may need to resolve disputes on imperfect data.

If you’re unsure about a particular scenario or how the rules apply to your team, a quick chat with an Employment Lawyer can save time and prevent costly errors.

Practical Steps To Embed LSL Compliance

1) Map Your Current Exposure

Run a report of everyone with 5+ years’ service and any regular casuals nearing 7 years. Use a planning estimate via a Long Service Leave Calculator to forecast upcoming leave and cash flow impact.

2) Standardise Your Processes

• Set a consistent approval process and reasonable blackout periods (if any) for peak times.
• Document your approach in a clear policy within the Staff Handbook and train managers to use it.

3) Update Contracts And Rosters

Ensure contracts, onboarding materials and rostering tools capture the data you need for accurate LSL calculation, especially for variable-hour staff.

4) Build LSL Into Workforce Planning

Plan for backfilling and cross-training so you’re not caught short when long-serving employees take extended blocks of LSL.

5) Close Out Correctly On Exit

At termination, calculate LSL accurately, apply the correct rate and averaging period, and include it in your Final Pay steps and payroll timelines.

Key Takeaways

• In Victoria, employees become entitled to take LSL after 7 years of continuous employment, including eligible regular and systematic casuals.
• Use the Act’s averaging rules to pay LSL at the correct “ordinary pay” when hours or rates have varied, and choose the method that gives the highest applicable rate.
• You must not unreasonably refuse a reasonable LSL request made with proper notice, and you can direct LSL with notice if needed for your operations.
• Plan for transfers and terminations: address who carries LSL liabilities in business sales or restructures, and pay pro rata LSL on exit after 7 years.
• Strong records, clear contracts and a practical LSL policy reduce disputes-especially for long-serving casuals and variable rosters.
• If you’re unsure about a scenario, getting tailored advice early will prevent costly mistakes and keep you compliant.

If you’d like a consultation on managing long service leave in your Victorian business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.