Long Service Leave NSW After 20 Years: Employer Obligations

If you’ve got team members who’ve reached 20 years with your business, that’s a milestone worth celebrating - and it comes with clear legal entitlements under the Long Service Leave Act 1955 (NSW).

In this guide, we’ll explain how long service leave (LSL) works in NSW once an employee hits the 20-year mark, how to calculate leave and pay, what you can (and can’t) do when scheduling leave, and what happens if employment ends. Our aim is to keep it practical so you can manage requests with confidence and stay compliant.

If you’re unsure how the Act interacts with your award or enterprise agreement, don’t stress - with the right information and a simple internal process, you can meet your obligations smoothly and fairly.

How Long Service Leave Works In NSW

Long service leave is a paid entitlement that rewards long, continuous service with the same employer. In NSW, most private sector employees are covered by the Long Service Leave Act 1955 (NSW) unless an enterprise agreement or pre‑modern award sets more beneficial terms (the Act usually remains the minimum standard).

Key features in NSW include:

• After 10 years of continuous service, an employee is entitled to 2 months (8.6667 weeks) of paid LSL.
• For each further 5 years of service after the first 10, they receive an additional 1 month (4.3333 weeks).
• “Continuous service” can include most paid leave and some unpaid absences, but certain interruptions may pause or break service. If there have been long breaks or irregular patterns, check how they affect accrual under the Act and any applicable industrial instrument.

LSL accrues by years of service, not hours worked. Part‑time employees also accrue LSL, and casuals may accrue LSL where employment is regular, systematic and continuous over the qualifying period.

Entitlements After 20 Years: How Much And Who Qualifies?

By 20 years of continuous service in NSW, the standard entitlement is:

• 2 months (8.6667 weeks) at 10 years;
• + 1 month (4.3333 weeks) at 15 years;
• + 1 month (4.3333 weeks) at 20 years.

In total, that’s 4 months of LSL at 20 years (about 17.3333 weeks).

Typical Scenarios

• Full‑time employee on a fixed weekly wage: At 20 years, the employee is generally entitled to 17.3333 weeks of paid LSL at their ordinary rate of pay when the leave starts.
• Part‑time employee: Calculate leave at the ordinary weekly hours and base rate when the leave begins. If hours have changed over time, use a reasonable averaging method that aligns with the Act and any applicable instrument, and document your workings.
• Regular and systematic casual: If continuity is met, calculate pay using a fair average to reflect ordinary earnings over a relevant period (for example, looking back at the past 12 months). Keep clear records that support your approach.

As a sense‑check for different patterns and averages, many employers use a long service leave calculator alongside the legislation and any industrial instrument.

Requesting, Directing And Scheduling Leave (What The Act Actually Says)

It’s important to align your process with the Act’s framework rather than relying on general “reasonableness” concepts that aren’t in the legislation. In NSW, long service leave is generally taken at a time agreed between the employer and employee. If you can’t agree, the employer may determine when leave is taken by providing the required notice under the Act.

Can You Direct Employees To Take LSL?

Yes. If agreement can’t be reached, the employer can determine the timing of LSL by giving the notice required by the Act (commonly understood as at least one month’s notice). This helps you plan around peak periods and ensure business continuity.

Can Employees Compel Leave At Their Preferred Time?

Employees can request leave, and in practice many employers accommodate preferred dates where possible. However, the Act does not include a general “must not unreasonably refuse” standard. If you can’t agree, the employer may fix the time for leave with the proper notice.

Minimum Blocks And Splitting Leave

LSL can be taken in separate periods, and by agreement it may be taken in smaller blocks (including shorter periods such as days). To avoid disputes, record the agreed dates, duration and pay rate basis in writing and file it with payroll.

Public Holidays During LSL

If a public holiday falls during a period of LSL, that day is generally treated as a public holiday rather than deducted from the LSL balance. Make sure your payroll instructions reflect this so you don’t accidentally underpay or over‑deduct leave.

Reflect Your Process In Policies And Contracts

Set expectations clearly in your workplace policies and your Employment Contract. It helps to outline how to request leave, the notice you expect, who approves leave, and how you’ll manage scheduling conflicts. Consolidating this into a practical, accessible staff handbook keeps decisions consistent across managers and teams.

How To Calculate And Pay LSL After 20 Years

LSL is generally paid at the employee’s “ordinary pay” when the leave starts. In most cases, this is the base rate for ordinary hours (excluding overtime, penalty rates and allowances unless an industrial instrument or contract explicitly includes them).

What Rate Do You Use?

• Permanent employees: Use the ordinary rate at the time the leave starts.
• Variable hours or earnings: If hours or pay patterns have changed (e.g. fluctuating part‑time hours or regular casual shifts), apply a fair averaging method consistent with the Act and any relevant award or agreement. Document the reference period you used and why it’s appropriate.
• Commission/incentive components: Only include these if they form part of “ordinary pay” under an applicable instrument or lawful contract term. If unsure, check the award or enterprise agreement and record your interpretation.

Leave Loading

Leave loading is not generally required on LSL under the NSW Act. If an award, enterprise agreement or contract provides for loading on LSL, follow the more beneficial term.

Superannuation And Tax Treatment

Super is commonly paid on LSL taken during employment when it counts as ordinary time earnings, and commonly not paid on LSL paid on termination. However, superannuation and tax treatment can change and may depend on your instrument and payroll settings. Always check current ATO guidance or speak with your payroll adviser. Sprintlaw provides legal assistance, but we don’t provide tax advice.

Practical Tips For Payroll

• Confirm the ordinary rate or average to use and keep a worksheet that shows your method and figures.
• Note any public holidays within the leave period so they’re not incorrectly deducted from the LSL balance.
• Align your approach with your contract terms and internal policies to ensure consistent treatment across staff.

Ending Employment After 20 Years: Payouts, Pro Rata And Transfers

When employment ends after long service, LSL usually forms part of final entitlements. Understanding what to pay and when helps you avoid underpayment and disputes.

Resignation, Dismissal, Redundancy Or Retirement

In NSW, once an employee has completed 10 or more years of service, accrued but untaken LSL is generally paid on termination, regardless of the reason for leaving (including resignation). After 20 years, that means any accrued balance - including the 4 months and any additional accrual since the last milestone - is typically payable at the employee’s ordinary rate at termination.

If you’re restructuring, it’s wise to model LSL alongside notice, redundancy pay and unused annual leave. Our overview on calculating final pay is a useful checklist, and you can also obtain tailored redundancy advice for complex scenarios.

Pro Rata Accrual Between Milestones

Leave continues to accrue between the 15‑year and 20‑year milestones. If employment ends before the next milestone, pay out any accrued but untaken LSL to the termination date.

Cashing Out During Employment

As a general rule, LSL can’t be “cashed out” during employment in NSW unless the legislation or a valid instrument expressly permits it. The standard approach is to take it as paid leave during employment or receive a payout on termination.

Transfers And Business Sales

Where a business is sold or employees transfer between entities, you may inherit LSL liabilities depending on whether continuity of service is recognised and how the transfer is structured. Factor LSL into due diligence, warranties and price adjustments, and ensure onboarding documents reflect whether service is carried over. For a helpful overview of obligations across entities, see our guide to transferring long service leave.

Parental Leave And Other Absences

Some absences don’t break continuity, while others may pause accrual or affect calculations depending on length and type. This is particularly relevant where staff have taken parental or extended unpaid leave during the 20‑year period. Our discussion of long service leave accrual during maternity leave outlines key considerations to review alongside the Act and any applicable instrument.

Records, Policies And Practical Compliance Steps

Good systems make LSL compliance straightforward, especially for long‑serving employees.

Maintain Accurate Records

• Track commencement dates, changes in hours or roles, and any significant absences that may impact accrual or continuity.
• Keep payroll data that supports your LSL calculations - this is essential where patterns vary or averaging is used.
• File leave requests, approvals, notice letters and any agreed variations in a central system.

Adopt A Clear, Consistent Process

Create a simple internal policy covering eligibility, request steps, notice required, how you’ll schedule leave if agreement isn’t reached, and your calculation method. Building this into a practical staff handbook helps managers make consistent decisions and reduces friction.

Check Awards Or Enterprise Agreements

Where an award or enterprise agreement applies, it may modify aspects of LSL or provide more beneficial terms. In those cases, you must meet the more generous entitlement. Keep an internal register of instruments that apply across your workforce and review them when assessing LSL.

Align Contracts And Onboarding

Your templates should reference LSL in line with the law and avoid contracting out of minimum entitlements. Ensure your Employment Contract aligns with your LSL policy and payroll approach (for example, how notice is given for scheduling leave and how ordinary pay is determined).

Plan For Final Pay

When employment ends, build LSL into your termination checklist alongside last wages, unused annual leave, redundancy (if applicable) and notice. A step‑by‑step approach - supported by your final pay process - helps prevent accidental underpayments.

Key Takeaways

• In NSW, long service leave after 20 years is typically 4 months (about 17.3333 weeks), with accrual continuing between milestones.
• LSL is generally taken by agreement; if you can’t agree on timing, the employer can determine when leave is taken by giving the notice required by the Act.
• Pay LSL at the employee’s ordinary rate when leave starts; where hours or earnings vary, use a fair averaging method consistent with the Act and keep clear records.
• After 10 years of service - including at and beyond 20 years - accrued but untaken LSL is usually paid on termination; model this alongside other final entitlements.
• Public holidays falling during LSL are generally not deducted from the LSL balance; ensure payroll handles this correctly.
• Super and tax treatment depend on current rules and your instrument - seek payroll/tax advice as needed (Sprintlaw provides legal, not tax, advice).
• Policies, accurate records, aligned Employment Contracts and a practical staff handbook make compliance easier and decisions consistent.

If you’d like a consultation on managing long service leave obligations in NSW - especially for employees reaching 20+ years - you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.