Long Service Leave In Victoria: Is It 7 Or 10 Years?

If you employ staff in Victoria, you’ve probably come across two different answers to a common question: is long service leave in Victoria based on 7 years or 10 years?

It’s an easy thing to get wrong, especially if you run a growing business across different states, you’ve recently taken over an existing team, or you’re relying on “how we’ve always done it”.

The good news is that Victoria’s long service leave rules are relatively clear once you break them down. The tricky part is understanding what changes at 7 years, why people still talk about 10 years (often because of other states’ rules), and how to handle real-world scenarios like resignations, terminations, casual staff, and business sales.

Below, we’ll walk you through the key Victorian rules in plain English, from an employer’s perspective, so you can stay compliant and avoid payroll disputes later.

What Is Long Service Leave (And Why Do Employers Get Caught Out)?

Long service leave (LSL) is a paid leave entitlement that recognises long-term, continuous service with the same employer.

Unlike annual leave and personal/carer’s leave (which sit under the National Employment Standards), long service leave is generally state and territory based. That means the rules are not identical across Australia.

This is one reason small businesses get caught out:

• The “7 vs 10 years” confusion often comes from comparing states (some are more 10-year focused).
• Payroll systems may not be set up to reflect Victorian thresholds correctly.
• Managers might make verbal promises about “when leave becomes available”.
• Business changes (like a sale, restructure, or transfer of staff) can affect how service is counted and who carries the liability.

Because long service leave can represent a significant cost (especially if multiple employees become entitled around the same time), it’s worth getting the rules right early and building the entitlement into your workforce planning.

So, Is Long Service Leave 7 Or 10 Years In Victoria?

In Victoria, the key milestone is generally 7 years of continuous employment.

In practical terms, many employees become entitled to take long service leave after 7 years of continuous service with you (subject to the Victorian rules about how and when it can be taken).

Just as importantly for employers, if an employee’s employment ends after they’ve completed 7 years of continuous employment, they will often be entitled to a pro-rata long service leave payment (even if they never actually took the leave). One important exception is where employment ends because of serious misconduct, which can affect whether any pro-rata LSL is payable.

The “10 years” figure is commonly mentioned because in some jurisdictions, the ability to take leave (or the full entitlement) is tied to 10 years. This can lead to assumptions like:

• “You only have to deal with long service leave once someone hits 10 years.”
• “We don’t need to track it properly until year 10.”

In Victoria, those assumptions can create compliance risks, because the 7-year point matters for both eligibility and potential payout exposure.

If you want a deeper Victorian-focused overview, it can help to compare common milestones people talk about (including the “10-year” misconception) alongside the real rules: long service leave.

What Counts As “Continuous Employment” In Victoria?

For most small businesses, the biggest practical question isn’t just “7 or 10?” - it’s when does the clock start, and what breaks it?

In Victoria, long service leave is generally based on continuous employment. “Continuous” doesn’t mean the employee must work every week without interruption. It means the employment relationship continues over time, and certain absences don’t break continuity.

Common Examples That Usually Don’t Break Continuity

Depending on the circumstances, continuity can usually be preserved even if an employee has periods of:

• annual leave
• paid personal/carer’s leave
• public holidays
• some unpaid leave (for example, unpaid parental leave)
• stand down periods (in some cases)

However, a key technical point for employers is that an absence can sometimes preserve continuity but still not count as service for accrual purposes. In other words, the employee may remain “continuously employed”, but certain unpaid periods may be excluded when calculating how much long service leave has accrued. This is one reason it’s important to keep accurate leave records and ensure payroll settings match your workforce’s actual work patterns.

Where employers often need to be careful is when there are changes to the employment relationship itself (for example, termination and rehire, or moving someone between entities within a group of companies).

Casual Employees: Can They Accrue Long Service Leave?

Yes - casual employees can accrue long service leave in Victoria if they have continuous employment and meet the relevant requirements.

This is another point where businesses get surprised, particularly if a casual has been working regular and systematic shifts over years.

To reduce risk, it’s worth ensuring your engagement terms are clear from day one and kept up to date, including using an appropriate Employment Contract for casual staff.

What If You Change Someone From Part-Time To Full-Time (Or Vice Versa)?

Changing an employee’s hours or status usually doesn’t reset long service leave, as long as the employment relationship continues.

However, it’s still important to document changes properly, because long service leave payments are based on ordinary pay at the relevant time (and disputes can arise if the historical record is unclear).

Many businesses manage this best by having clear contract terms and consistent updates when roles change, including using the right Employment Contract for permanent staff.

When Does Long Service Leave Become Payable Or “Available” In Victoria?

From an employer perspective, it helps to separate long service leave into two issues:

• Accrual: LSL typically accrues progressively over time (it’s not “all at once” at year 7).
• Access/payout: the employee may be able to take it after a certain point, or it may need to be paid out when employment ends.

Taking Long Service Leave While Still Employed

In Victoria, employees generally become entitled to take long service leave after completing 7 years of continuous employment.

As the employer, you’ll still need to manage the “how” and “when” carefully. For example, you should:

• ask the employee to provide appropriate notice (and have a process for this)
• check the employee’s accrued entitlement (and how it’s calculated, including whether any unpaid absences are excluded from the accrual calculation)
• consider operational coverage (especially for small teams)
• confirm the arrangement in writing to avoid misunderstandings

Because long service leave can involve extended absences, having clear leave procedures in a policy document can save a lot of back-and-forth. Many employers include this in a Staff Handbook, along with other leave and payroll processes.

Paying Out Long Service Leave On Termination Or Resignation

This is where the “7 years” threshold becomes especially important for employers.

If an employee’s employment ends after they’ve completed 7 years of continuous service, they may be entitled to a pro-rata payout of long service leave, depending on why the employment ended and the applicable Victorian rules.

One key exception to be aware of is that if an employee is dismissed for serious misconduct, they may lose their entitlement to a pro-rata long service leave payout (even if they have more than 7 years’ service). Because “serious misconduct” can be contentious, it’s important to document the process and ensure the classification is supportable.

From a practical perspective, this means:

• your business may have a payout liability even if the employee never took long service leave
• termination calculations need to include long service leave where applicable (and account for any excluded periods that don’t count toward accrual)
• you should budget and account for accrued LSL as part of financial planning

If you’re already managing end-of-employment processes (final pay, notice periods, and compliance steps), it’s usually best to treat long service leave as part of a broader termination checklist so nothing is missed.

Common Employer Scenarios (And How To Handle Them)

Long service leave questions often show up at the same time as other big business events. Here are some of the most common scenarios we see for Victorian employers.

1. You’re Buying Or Selling A Business

When a business is sold, employees may transfer to the new owner and their service may be recognised (depending on how the transaction is structured and what terms are agreed).

In many Victorian business sales, long service leave issues come down to whether the employee’s service is treated as continuous with the new employer and, if so, how the long service leave liability is dealt with between seller and buyer.

For employers, this can affect:

• who is responsible for accrued long service leave liabilities
• whether employee service is treated as continuous
• what needs to be disclosed and documented in the sale contract

This is one of those areas where it’s easy for a “commercial” deal to become an “employment liability” problem later if the paperwork doesn’t clearly allocate responsibility (including whether entitlements are transferred, paid out, or otherwise adjusted as part of settlement).

2. You Have Employees In Multiple States

If your team works across state borders, you may need to consider:

• which jurisdiction’s long service leave rules apply
• how you track entitlements for employees who relocate
• whether payroll systems are set up correctly for each state

Even if your HQ is in Victoria, the applicable laws may differ depending on where the employee is employed and performs work.

3. You’re Dealing With Underperformance Or Misconduct After Year 7

Discipline and termination decisions can become more sensitive once an employee is long-serving, particularly if a long service leave payout might be triggered.

That doesn’t mean you can’t manage performance or misconduct - but it does mean you should ensure your process is documented, fair, and legally compliant.

In particular, if dismissal for serious misconduct is being considered, it’s worth getting advice before taking action, because that classification can affect final entitlements (including whether any pro-rata long service leave is payable) and can increase the risk of disputes if not handled carefully.

4. Your Contracts Or Policies Don’t Mention Long Service Leave

Long service leave is a legal entitlement, so it exists even if your contract doesn’t spell it out.

However, contracts and policies still matter because they help you manage the practical side of leave requests and record-keeping, and they reduce the likelihood of disputes about process.

As a starting point, make sure you have:

• appropriate contracts for your workforce (including casual vs permanent)
• clear leave request processes and notice requirements
• a consistent system for approving leave and confirming it in writing

How Do You Stay Compliant As A Victorian Employer?

Long service leave compliance is much easier when you treat it as part of your overall employment compliance framework - not a one-off issue that appears at year 7.

1. Track Accruals Properly (And Reconcile Regularly)

Your payroll or accounting system should track long service leave accrual progressively and accurately, including correctly treating periods that may preserve continuity but don’t count toward accrual.

We often recommend setting a recurring internal check (for example, quarterly or twice a year) to:

• review long service leave balances
• identify employees approaching key milestones
• forecast potential leave absences and payout liabilities

2. Align Your Contracts With How You Actually Employ People

A common risk area is when a worker is treated like an ongoing employee in practice, but their documentation is inconsistent or outdated.

Making sure you’re using the right documents helps prevent avoidable disputes later, including:

• a fit-for-purpose Employment Contract for your role type
• clear terms for casual engagement where relevant
• written variations if hours, pay, or role responsibilities change over time

3. Keep Policies Practical (So Managers Can Follow Them)

In small businesses, policies fail when they’re too long, too generic, or disconnected from day-to-day reality.

Your policies should give managers a simple process for:

• receiving leave requests
• checking eligibility and balances
• responding within a reasonable timeframe
• confirming approved leave in writing

4. Check Award And Agreement Settings

While long service leave in Victoria is state-based, your broader employment compliance still needs to align with modern awards, enterprise agreements (if any), and minimum standards.

If you’re tightening up employment compliance generally, it can help to review your Award Compliance position at the same time, so your payroll settings and documentation are consistent across the board.

5. Get Advice Early When You’re Terminating Or Restructuring

Long service leave issues often come up at the same time as redundancy, restructures, or termination decisions.

If you’re planning changes that affect long-serving staff, getting advice early can help you:

• avoid disputes about entitlements
• get final pay calculations right
• reduce the risk of claims arising from process issues

For example, if redundancy is on the table, it may be worth considering tailored Redundancy Advice so your business stays compliant while making necessary changes.

Key Takeaways

• If you’re trying to work out whether long service leave in Victoria is based on 7 years or 10 years, the key milestone is generally 7 years of continuous employment (not 10).
• In Victoria, long service leave typically accrues progressively, and employees may be able to take long service leave after 7 years (subject to the Victorian rules).
• For employers, the 7-year mark matters because an employee who leaves after 7 years may be entitled to a pro-rata long service leave payout in many situations - but dismissal for serious misconduct can change what’s payable.
• Casual employees can still accrue long service leave if they have continuous employment, so it’s important to have the right engagement documents in place.
• The best way to stay compliant is to track accruals accurately, maintain clear contracts and policies, and get advice early during business changes, termination decisions, or restructures.

If you’d like help with long service leave compliance in Victoria, updating your employment contracts and policies, or managing a termination for a long-serving employee, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.