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As a small business owner or employer, you do everything you can to create a rewarding workplace, look after your team, and keep your business compliant. But when it comes to employee entitlements like long service leave, the rules can be confusing – especially with terms like “Long Service Leave Act” (sometimes called the “long service act”, “LSL act”, or even “long service leave act act”) showing up in contracts and awards.
If you’re unsure about what you need to do to meet your obligations under the Long Service Leave Act, you’re definitely not alone. This essential entitlement helps reward staff for loyalty and long tenure, but the rules vary between states and can catch many business owners out – particularly around issues like public holidays and part-time arrangements.
In this comprehensive guide, we’ll break down what the Long Service Leave Act covers, how entitlements work, your duties as an employer, and how public holidays fit into the mix. We’ll also flag how to best document everything, and explain how Sprintlaw can help you manage these requirements efficiently and with confidence.
What Is the Long Service Leave Act?
The Long Service Leave Act (“LSL Act”) refers to legislation in each state and territory of Australia that sets out minimum entitlements for long service leave. Long service leave is a period of paid leave that employees are entitled to after a long period of continuous service with the same employer. For most private sector businesses, this period is typically at least 7–10 years, but the exact length and calculation can vary.
It’s important to know that there isn’t a single federal “Long Service Leave Act” – instead, each state and territory has its own legislation, such as:
- Long Service Leave Act 1955 (NSW)
- Long Service Leave Act 2018 (VIC)
- Long Service Leave Act 1987 (SA)
- Long Service Leave Act 1992 (QLD)
- Long Service Leave Act 1976 (ACT)
And so on, for the other states and territories in Australia.
As an employer, you need to be familiar with the Long Service Leave Act that applies where your employee works. Sometimes, long service leave entitlements are included in modern awards, enterprise agreements or other registered agreements – if these are more generous than the minimum in the Act, you must comply with those terms instead.
Key point: The LSL Act provides the minimum “safety net” for long-serving employees, but check if any higher entitlements apply.
Why Does Long Service Leave Matter for Employers?
Providing long service leave isn’t just a legal requirement – it’s an important recognition of employee loyalty and a motivator for retention. Failing to comply can result in penalties or disputes, which can be costly in time, money, and workplace trust.
Clear understanding of the LSL Act also helps you:
- Budget accurately for future leave entitlements
- Ensure payroll and records are up to date
- Apply the right rules for part-time, full-time, and casual staff
- Handle public holidays during long service leave periods correctly
- Avoid misunderstandings or workplace unrest
Managing long service leave proactively is part of running a smart, compliant, and positive Australian business.
How Does Long Service Leave Work?
Put simply, long service leave gives an eligible employee the right to take a period of paid time off after a set number of years of “continuous service.” The details – how much leave, when it’s taken, how it’s paid – depend on the relevant state or territory law and (sometimes) industry specific agreements.
How Much Leave?
- In most states, employees are entitled to at least 2 months (8.67 weeks) of paid long service leave after 10 years’ continuous service.
- Some states allow pro-rata entitlements if employment ends after 7 years for any reason other than serious misconduct.
- Check the legislation in your state for precise rules (for example, Victoria has a slightly more generous scheme for certain employees).
Who Is Eligible?
- Most full-time, part-time, and regular casual employees qualify, provided their service has been “continuous.”
- Service is usually “continuous” unless broken by resignation, dismissal for cause, or certain kinds of leave (such as unpaid parental leave beyond legislated periods).
How Is It Paid?
- Long service leave is generally paid at the employee’s ordinary pay rate (excluding bonuses and overtime) at the time the leave is taken.
- If the leave is “cashed out” on termination, payment rules can differ – again, check your state’s LSL Act.
How Do Long Service Leave and Public Holidays Work?
This is a common question – and one where confusion often arises. What happens if a public holiday (like ANZAC Day, Australia Day, or Christmas) falls during an employee’s long service leave?
- In almost every state and territory, the answer is: the employee is entitled to the public holiday in addition to their long service leave.
- This means you don’t count the public holiday as a day of long service leave taken. If a two-week period of long service leave includes a public holiday, that holiday is added to the leave period, not deducted from the entitlement.
- For example: If your employee takes 10 business days of long service leave, and a public holiday falls in the middle, they get their ordinary pay for the public holiday and 10 days’ leave. So, they’ll be away from work for 11 days, not 10, but only 10 days are deducted from their LSL balance.
This protects the employee’s leave entitlements and ensures they are not worse off by taking leave during public holiday periods. Accordingly, as an employer, it’s important your payroll system is set up to recognize and apply these rules – otherwise you risk underpaying staff and failing to comply with the law.
Are There Any National Standards for Long Service Leave?
National Employment Standards (NES) set out a minimum “long service leave” entitlement for employees covered under the national workplace relations system, which is most private sector businesses. However, for as long as there is a state long service leave law that applies (which is almost always the case for private sector staff), that law takes precedence. The NES itself doesn’t specify the detail, except to say employees should receive the most generous entitlement that applies to them (whether under the Act, an award, enterprise agreement, or contract).
What Laws Do I Need To Follow As An Employer?
When it comes to long service leave, Australian employers must comply with:
- The Long Service Leave Act applicable to the state/territory where employees perform their work
- Any modern awards or enterprise (or registered) agreements that apply
- General employment law obligations, including keeping accurate leave and pay records
- Australian Consumer Law (where relevant, particularly for employee contracts that offer above-minimum entitlements)
As always, when state rules conflict with a federal instrument (like the NES), the more generous standard applies to the employee.
What Are My Obligations Around Record Keeping?
Employers must keep accurate records for every employee about:
- Start date and period(s) of continuous service
- Amounts of long service leave accrued and taken
- Public holidays during periods of leave
- Leave balances paid on termination
These records, along with payroll details, must be kept for at least 7 years (or longer, depending on state laws). Not keeping proper records can expose you to fines, disputes, or difficulties calculating owed entitlements later on. Making sure your employee and pay records are up to scratch is a must.
How Do I Calculate Long Service Leave for Different Types of Workers?
Long service leave isn’t only for full-timers. You need to know how to handle pro-rata and part-time entitlements, as well as staff who have changed their hours or employment status. Here’s a quick run-down:
- If an employee works part-time or changes from full-time to part-time (or vice versa), their leave is usually based on their “ordinary hours” averaged across their qualifying period.
- For casual employees with “regular and systematic” employment, their long service leave is calculated based on their average weekly hours across their continuous service.
- If an employee leaves after 7 years (but before the standard 10-year threshold), most states provide for a pro-rata LSL payout unless dismissed for serious misconduct.
For a more in-depth look, see our guide on casual worker leave entitlements.
What If My Business Changes Ownership?
If you’re buying or selling a business, it’s important to note that employee service is generally considered “continuous” even if the business has changed hands – so accrued LSL entitlements transfer as well. The new employer may inherit responsibility for those entitlements unless otherwise specified in the sale contract. For more on buying a business and handling employee obligations, check out our guide on employee rights when selling your business.
What Legal Documents Should I Have in Place for Long Service Leave?
Having the right contracts and workplace policies is key to avoiding misunderstandings and keeping long service leave compliance clear. We recommend ensuring you have:
- Employment Agreement: Clearly sets out long service leave accrual, and references the applicable LSL Act or award.
- Workplace Policy/Staff Handbook: Summarises your approach to LSL, public holidays, and how to apply for leave (see our guide to staff handbooks).
- Payroll & Leave Records: Proper systems for tracking service, leave accrual, and payouts (as discussed above).
- Business Sale Agreement: If selling your business, include terms about who will be liable for LSL entitlements (more on employee entitlements during business sales).
Each business is different, so not every document is required in every scenario – but the right documentation streamlines compliance and prevents costly disputes.
How Do I Handle Disputes or Complex Cases?
Most disputes can be avoided with clear policies, communication, and record keeping. However, some situations – like interpreting breaks in service, enterprise agreements, or business sales – can get complex quickly.
If you’re unsure how to apply the LSL Act or if a disagreement arises with an employee about their entitlement (such as whether public holidays have been counted correctly), it’s wise to get legal advice early. A lawyer can review your situation, help negotiate an outcome, and ensure you don’t inadvertently breach any laws.
Key Takeaways
- The Long Service Leave Act is state-based legislation setting out your staff’s minimum entitlement to long service leave after continuous service.
- You need to follow the rules in your state or territory and also check if any awards, agreements, or contracts provide more generous entitlements.
- When a public holiday falls during an employee’s long service leave, it does not reduce their leave balance – they receive the public holiday in addition.
- Correct calculation and record keeping for all kinds of employees – including casuals and part-timers – is essential to stay compliant under the LSL Act.
- All employment contracts, workplace policies, and payroll systems should reference the applicable LSL legislation and handle long service leave accurately.
- If your business changes ownership, accrued LSL entitlements will generally carry across for ongoing employees.
- Getting legal advice when in doubt can help avoid costly compliance mistakes and employee disputes.
If you would like a consultation on long service leave, employment agreements, or workplace compliance for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat. We’re here to help you put the right legal foundations in place so you can focus on building your dream business with confidence.
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