Calculating Long Service Leave In Victoria: Employer’s Step-By-Step Guide

Long service leave (LSL) is one of those entitlements that can feel straightforward at first glance, then tricky once you’re faced with changing hours, casual rosters, unpaid parental leave or a transfer of business.

If you employ staff in Victoria, getting the calculation right isn’t optional - it’s a legal requirement. The good news is that the rules are clear once you break them down, and a simple, consistent process will keep you compliant.

In this guide, we’ll walk through when employees qualify for LSL in Victoria, how to calculate it (including variable hours), how to work out the correct pay rate, and what to do in special scenarios like casual employment or business sales. We’ll also share practical tips so your payroll and records support smooth, compliant payments and approvals.

What Is Long Service Leave In Victoria?

In Victoria, long service leave is a period of paid leave that employees earn after a long period of continuous employment with the same employer. It’s governed by the Long Service Leave Act 2018 (Vic), which applies to most Victorian employees (including casuals) unless a more beneficial entitlement applies under another industrial instrument.

At its core, LSL recognises long, continuous service - but “continuous” doesn’t mean employees can never change hours, move between part-time and full-time, or take certain kinds of leave. The Act has detailed rules to make sure genuine continuity is recognised.

When Do Employees Become Entitled (And Who’s Covered)?

In Victoria, employees become entitled to take long service leave after 7 years of continuous employment with the same employer. This includes full-time, part-time and casual employees (if the casual employment has been regular and systematic and the service is not broken).

Key points about continuous employment:

• Most paid leave (like annual leave and paid personal leave) counts towards service and doesn’t break continuity.
• Unpaid parental leave generally does not count toward service after the first 52 weeks, but it doesn’t break continuity. The first 52 weeks of parental leave usually count towards service under the Act.
• Authorised absences (for example, some unpaid absences approved by the employer) typically do not break continuity; whether they count toward service depends on the type and duration.
• Service can continue through a transmission of business. If you buy or sell a business and keep the employee, continuity can carry over to the new employer under the Act (more on that below).

Employees can usually take LSL once they hit 7 years, and if employment ends after 7 years, you must pay out any untaken entitlement. If you’re working out end-of-employment payments, it’s sensible to consider how long service leave interacts with other items in final pay.

How To Calculate Long Service Leave In Victoria (With Examples)

Victoria uses a simple formula to determine the amount of leave: an employee is entitled to 1/60th of their period of continuous employment, expressed in weeks. The entitlement grows continuously - it’s not “all at once” at 7 years - but employees generally can’t take it until they reach 7 years.

Step 1: Work Out Continuous Employment (In Weeks)

Count the total weeks of continuous employment, adjusting for periods that don’t count (for example, some unpaid parental leave beyond the first 52 weeks). Continuity itself is usually preserved through most authorised absences, but whether the time counts toward service may differ.

Step 2: Apply The 1/60 Formula

Long service leave (in weeks) = Total weeks of continuous employment ÷ 60.

Example (full-time, 7 years exactly):

• 7 years of service is 7 × 52 = 364 weeks.
• 364 ÷ 60 = 6.0667 weeks of LSL.

Step 3: Convert Weeks Of Leave To Hours

Employees take leave in hours, so you’ll need the correct average weekly hours to convert weeks into hours of leave. If an employee’s hours have changed over time, the Act requires you to use an averaging method that gives the fairest outcome to the employee. In Victoria, you typically use the greater of the employee’s average weekly hours over:

• the last 12 months; or
• the last 5 years; or
• the entire period of continuous employment.

Example (hours have varied):

• You determine the employee’s LSL entitlement is 6.0667 weeks.
• Their average weekly hours are 35 over the past 12 months, 33 over the past 5 years, and 34 over the entire period.
• Use 35 hours (the greatest average). LSL hours = 6.0667 × 35 ≈ 212.33 hours.

Step 4: Calculate The Pay Rate For LSL

Once you have the hours, multiply by the correct “ordinary” rate of pay for LSL (see the next section for how to work this out where rates vary). LSL is paid at the employee’s ordinary time rate of pay for their ordinary hours during the period of leave.

Tip: If you want to check your work quickly or test “what if” scenarios, try our plain-English Long Service Leave Calculator as a sense check alongside your payroll system.

Worked Example (Putting It All Together)

Let’s say an employee has 9 years and 3 months of continuous employment. You calculate total weeks (adjusting for any non-counting absences), then divide by 60 to get weeks of LSL. Suppose that yields 8.05 weeks. If their greatest average weekly hours (across the 12 months, 5 years, or entire period) is 36 hours, their LSL hours entitlement is:

• 8.05 weeks × 36 hours = 289.8 hours.

You would then pay those hours at the correct ordinary rate during the leave period.

How Do You Work Out The Rate Of Pay For LSL?

LSL is paid at the employee’s ordinary time rate of pay for their ordinary hours during the leave. If an employee’s rate of pay has changed or includes allowances and loadings, you’ll need to determine their “ordinary pay” under the Act.

Key principles for the rate of pay:

• Ordinary time rate: Pay LSL at the ordinary hourly rate (not including overtime), plus any separately identifiable amounts that form part of ordinary pay under the Act.
• Variable pay or hours: If there have been changes in hours or pay over time, you typically use averaging rules (for example, consider averages over 12 months, 5 years or the entire period) to identify a fair ordinary rate for LSL. The goal is to reflect the employee’s ordinary earnings, not a temporary spike or dip.
• Loadings and allowances: Some allowances or loadings that are part of ordinary pay (for example, a regular all-purpose allowance) can be included; others (like overtime) are excluded. Check your award or agreement to identify what forms part of “ordinary pay.”

If you’re unsure, it’s best to get advice so the correct components are included. A tailored Employment Contract and clear pay definitions help prevent confusion later.

Special Scenarios: Casuals, Part-Timers, Parental Leave, Business Sales

LSL rarely exists in a perfect “full-time from day one” world. Here’s how the Victorian rules commonly apply in real workplaces.

Casual And Part-Time Employees

• Casuals: Casual employees can accrue LSL if their casual work has been regular and systematic and their employment is not broken. Their entitlement is calculated using the same 1/60 formula and the “greatest average weekly hours” approach when converting weeks to hours.
• Part-time employees: Part-timers also accrue LSL continuously. If their hours change over time (as often happens), apply the “greatest average” hours test so the conversion to hours reflects their ordinary working pattern fairly.

Parental Leave, Unpaid Leave And Other Absences

• Paid leave: Most paid leave (annual leave, paid personal leave, paid parental leave) counts towards service and doesn’t break continuity.
• Unpaid parental leave: The first 52 weeks will generally count towards service for LSL in Victoria; any additional unpaid parental leave beyond that usually does not count towards service, but it does not break continuity.
• Other authorised unpaid absences: Often will not break continuity; whether the time counts as service depends on the nature and duration of the absence.

Transmission Or Sale Of Business

If a business (or part of it) is sold and an employee moves across to the buyer with continuity, their LSL continuity is usually preserved under the Act. In practice, that means service with the old employer counts toward LSL with the new employer unless otherwise provided by law.

This is important when you’re transferring employees within group companies or acquiring a business with existing staff, because LSL liabilities can carry over. Commercial terms in the sale contract may adjust the price for accrued entitlements, but your payroll and onboarding still need to reflect the preserved continuity for each transferred employee.

If you need to understand how LSL behaves when employees change entities but keep working in the business, read more about transferring long service leave across employment changes.

Paying, Taking And Recording LSL: Employer Responsibilities

Once you’ve got the calculation right, the next step is managing applications, approvals and payroll. Good systems and clear policies make this smooth for everyone.

When Employees Can Take Leave

• Employees become entitled to take LSL after 7 years’ continuous employment.
• Leave is usually taken in one continuous period unless you agree to separate periods (the Act allows for taking LSL in smaller blocks in certain circumstances).
• Employees can request to take LSL with reasonable notice; you can agree on timing to balance business needs and the employee’s plans.

Record-Keeping And Payroll

• Keep thorough records: Track start dates, approved absences (with paid/unpaid status), hours changes, and pay rate changes. This is essential for accurate LSL calculation years later.
• Document the calculation: Keep a clear worksheet or payroll note explaining how you calculated the entitlement (weeks, averages used, hours, rate). This helps if the figure is ever questioned.
• Paying LSL on termination: If employment ends after 7 years, pay out the untaken LSL balance in the final pay at the correct ordinary rate. Use your standard process for calculating final pay, with LSL shown clearly.

Policies And Contracts

Most disputes can be avoided with clear documents that explain how leave is requested, approved and paid, and how records are kept. Consider incorporating LSL processes into a simple Workplace Policy, and make sure each employee has an appropriate Employment Contract that aligns with the Act and any applicable award or agreement.

What If Employment Ends?

If employment ends after 7 years’ continuous service, you must pay out any unused LSL. This applies whether the employee resigns, is made redundant, or is dismissed (subject to limited exceptions under the Act). Having a tidy process for notice, evidence and payments - for example, using an Employee Termination Documents Suite - helps ensure the LSL component is accurate and on time.

Common Pitfalls To Avoid

• Assuming casuals don’t accrue LSL - in Victoria, they can, provided the casual employment is regular and systematic and the service is continuous.
• Using just “current hours” to convert weeks to hours - the Act requires you to use the greatest average over the past 12 months, 5 years or entire service where hours have varied.
• Forgetting that the first 52 weeks of unpaid parental leave generally count towards service for LSL in Victoria.
• Missing continuity during a transmission of business - this can understate entitlements and create underpayment risk.
• Not documenting the calculation - without a clear record, small errors can creep in and become costly later.

Key Takeaways

• In Victoria, long service leave is generally 1/60th of an employee’s total continuous employment, with eligibility to take LSL after 7 years.
• Convert weeks to hours using the greatest average weekly hours over the last 12 months, last 5 years or the entire period - this is crucial where hours have changed.
• Pay LSL at the employee’s ordinary time rate for ordinary hours; if rates have varied, apply the Act’s averaging rules so the rate reflects ordinary earnings.
• Casuals and part-timers can accrue LSL; many absences don’t break continuity, and the first 52 weeks of unpaid parental leave generally count towards service.
• Continuity can carry through a transmission of business, so check LSL liabilities carefully in sales, restructures and group transfers.
• Strong records, clear policies and fit‑for‑purpose contracts reduce errors and disputes; where the scenario is complex, it’s wise to speak with an employment lawyer.

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