Long service leave

Less than 5 years

A worker with less than 5 years of continuous service with an employer is not entitled to long service leave.

More than 5 years but less than 10 years

A worker who has completed more than 5 years but less than 10 years continuous service is entitled to a long service pro-rata payment if they:

• are dismissed for any reason other than serious and wilful misconduct, OR
• die.

A worker who has completed more than 5 years but less than 10 years of continuous service may be entitled to a long service pro-rata payment if:

• the worker resigns on account of illness, incapacity, domestic or other pressing necessity.

If they resign on account of illness or incapacity, it is suggested they provide a medical/specialist report(s) to the employer at the time they resign so an assessment can be made.

(Note: The LSL Act does not define "domestic or other pressing necessity”.)

What workers need to demonstrate

The questions a worker should answer when claiming pro-rata long service leave are:

• Was the reason claimed for termination either illness, incapacity, domestic or other pressing necessity?
• Was this the genuine reason for the resignation? This reason doesn’t have to be the only reason they’re leaving the employment, but was it the real or motivating reason for it?
• Would a reasonable person in the worker’s position have felt compelled to resign?

A worker will need to demonstrate that their circumstances gave them no option but to resign from work.

• The onus of proof lies on the worker.
• The employer has the right to request the worker provide evidence to support their claim.
• It is suggested that evidence supporting the circumstances of the worker be provided to the employer at the time of resignation to allow an assessment to be made.

Casual workers often work irregular hours, meaning they will have weeks when they work zero hours.

Zero-hour weeks fall into 5 categories and those categories are treated differently in terms of the accrual of service and how it will impact on the calculation of average weekly hours/ordinary remuneration for payment:

A zero-hour week does not break continuous service.

For service to be broken a careful review has to be done asking the following questions:

• How long has the worker not worked?
• Is it more than two months?
• If so, is it an absence under the terms of their casual employment?
• Are there any relevant provisions in their Award or enterprise agreement?
• Is it due to slackness of the employer’s trade?
• Is there evidence that they are still active “on the books” e.g. they have notified the employer of their availability and desire to work, or the employer has contacted them to try and roster them.
• Is the absence due to illness or injury or parental leave?

It’s important to look at all the factors to determine whether a period of zero hours weeks constitutes a break in service.

Once you have identified that they have reached eligibility for long service leave, then you need to calculate how much is payable for each week’s entitlement.

For casual workers,long service leave pay is based on the normal weekly number of hours multiplied by the ordinary remuneration.

Long service leave is paid at the worker's ordinary pay rate. The ordinary pay rate for casual workers includes the casual loading.

For more information on how to do this, please view the Long Service Leave Casuals Guide. 

As long as there is no break in the continuous service, the status of a worker doesn’t impact the accrual of service. The amount earned or hours worked will be important in calculating how much they should be paid for their long service leave if they are entitled.

Long service leave is based on the concept of continuous service.

A resignation by a worker breaks continuity of service. If the worker is subsequently re-engaged by the same employer, the accrual of long service leave would commence on that worker’s re-engagement. The previous service with the employer does not count as service for long service leave purposes.

Leave does not put a break in a worker's service.

A break in service will not affect the continuity of service or the calculation of service if the absence of the worker is under the terms of the worker’s employment or the absence of the worker is on account of illness or injury.

A break in the worker's service will not affect the continuity of service but does not count when calculating length of service in the following circumstances:

• Made by the employer with the intention of avoiding any obligation imposed on the employer by the LSL Act or by any obligation in relation to sick leave imposed on the employer by a State industrial instrument
• Arising from an industrial dispute
• Made by the employer by reason of slackness of trade
• Arising from the absence of the worker for any cause by leave of the employer
• An absence caused by the employer (except for reasons iii – v above) where the worker returns to the service of, or is re-employed by, the employer within 2 months.

Unpaid parental leave does not count as service but does not break service. A period when a worker is on unpaid parental leave and receives Centrelink payments for Parental Leave Pay does not count as service but does not break service. If a worker receives Paid Parental Leave as part of their contract of employment, the period of paid leave will not affect the continuity of their service and will count as service.

The effect of this is that a worker in NSW who was employed for 10 years and took a total of 12 months of unpaid parental leave would need to work a further 12 months to have served the 10 years necessary to accrue the long service leave entitlement.

Each state and territory has legislation that provides for long service leave. The amount of long service leave and the calculation for payment for such leave is different between each state and territory.

If a worker is located outside NSW, please contact the following long service leave agency in your state or territory for further information:

• ACT WorkSafe ACT
• NT NT Government
• Qld Queensland Industrial Relations
• SA SafeWork SA
• Tas WorkSafe Tasmania
• Vic Wage Inspectorate Victoria
• WA Department of Mines, Industry Regulation and Safety

If a worker works part of their service in NSW and part of their service outside NSW each period of the worker’s service should be assessed to determine whether there is a substantial connection to NSW.

Only periods of service with a substantial connection to NSW will count as service for the purposes of the LSL Act.

Some factors that may be relevant to assessing the existence of a substantial connection include the following:

• The contract of employment was made in NSW;
• The worker received directions from NSW to work outside of NSW; or
• The worker was performing work to directions coming from NSW.

There may also be other factors which are not listed above.

If a worker was stood down without pay between 11 March 2020 and 31 March 2022 as a direct or indirect result of the COVID-19 pandemic their service is not broken and their time stood down counts as if they were working.

If there was a JobKeeper enabling direction and they worked periods of reduced or zero hours their average ordinary hours or average ordinary wage will not be impacted by those periods. Refer to FAQ 18 for more information about how JobKeeper enabling directions affect “ordinary pay” if a worker had their hours reduced due to Covid-19.

The continuity of the worker's service is not considered to be broken if a business is sold in whole or in part and that business:

• continues by the new owner as the same business, and
• the worker is employed in that business,

Service with any previous owner(s) of the business counts as service with the new owner.

When a business changes owner, copies of the record of all long service leave taken and accrued by workers must be transferred from previous employer to the new owner of the business.

Long service leave should be taken in one continuous period of leave or, if the worker and employer agree, long service leave may be taken in 2 or more separate periods of not less than 1 day.

The worker and employer should each keep a copy of any agreement(s) made.

If the worker is currently employed between 10 and 15 years, the worker may take paid leave of no more than 2 months (8.6667 weeks) ie the 10-year entitlement.

At 15 years, there will be an entitlement to a further 1 month (4.3333 weeks) paid leave.

If the worker is terminated or ceases work for any reason between 10 and 15 years' service, a proportionate amount on the basis of 3 months for 15 years' service is paid.

Once a worker has completed 15 years of service, only completed years of service will count towards long service leave, and the period of service ends at the last completed year. For example, if a worker has 15 years and 9 months service, only 15 years being the completed years of service will count towards long service leave.

By agreement leave can be taken in advance. See FAQ 11.

Long service leave may be taken in advance where there is agreement to do so between the employer and worker.

Please note that if a worker’s employment is terminated before they achieve 10 years continuous service, the money paid for long service leave taken in advance may be recovered by the employer.

An employer and a worker may agree to postpone the taking of long service leave to a preset future date.

If the leave is postponed by agreement, the employer and the worker may also agree to set the ‘ordinary pay’ for the postponed leave is  the ordinary pay applicable at the date that the agreement to postpone the leave was entered into.

The worker and employer should each keep a copy of any agreement(s) made.

Under the Long Service Leave Act, employers must allow workers to take leave as soon as possible, considering the business’s needs. Employers should give one month’s notice when asking a worker to take leave, but this can be less if the worker agrees.

Workers don’t have to give a specific period of notice to their employer when they want to take leave, but it’s better if both sides talk and agree on a good time for the leave. If they can’t agree, and the business needs the worker to take leave at a certain time, the employer must show they’ve tried to agree with the worker first. If there’s still no agreement, the employer can legally tell the worker when to take leave, as long as they give enough notice.

It’s a good idea to get legal advice to make sure this instruction is fair and follows the law.

Refer to FAQ 9 for information about taking long service leave in multiple periods.

For workers who are remunerated wholly in relation to an ordinary time rate of pay, long service leave pay is based on whichever is the greater:

• the worker’s ordinary pay on the day before the leave is taken, or
• the average weekly ordinary pay, earned by the worker during the previous 5 year period ending on the day before the leave is being taken, (generally excluding any weeks of unpaid absences from the 5 year average).

In calculating the payment of long service leave, only weeks where a worker works and is paid should be included in calculations for ordinary remuneration. This means unpaid absences, such as parental leave or unpaid sick leave should not be included in the 5 year average ordinary remuneration calculation.

For example if Tom works a fixed weekly number of hours and has taken 6 months (26 weeks) of unpaid parental leave during the previous 5 years, the divisor would be reduced.

When calculating their average weekly pay you would divide Tom’s total weekly pay over the previous 5 years by 234 weeks not 260 weeks (i.e., 260 minus 26 weeks = 234).

This is to exclude the 26 weeks where Tom took unpaid parental leave and where Tom did not earn ordinary remuneration.

For information on the impact of unpaid absences refer to FAQ 2 – Long Service Leave for Casuals or FAQ 5 How does parental leave affect continuous service? Or FAQ 7 How does COVID-19 stand downs or reduced hours impact long service leave? 

For workers who have no normal weekly number of hours fixed under the terms of the worker’s employment (such as part time workers with fluctuating hours) the employer needs to work out the normal weekly number of hours which is the greater of:

• the average weekly number of hours worked during the previous period of 12 months ending on the day prior to the leave being taken, or
• the average weekly number of hours worked during the 5 years ending on the day prior to the leave being taken,

The greater average of the two will be the deemed normal weekly number of hours. 

Calculating the ordinary remuneration

• Use the deemed hours to determine the ordinary remuneration on the prescribed date by multiplying the deemed hours by the hourly rate of pay on the prescribed date. 
• The deemed hours are also used for each week the worker worked over the last 5 years and multiply by the hourly rate of pay of the worker applicable for that week to determine the ordinary remuneration for each week over the last 5 years.
• The next step is to calculate the average weekly amount of the ordinary remuneration which was earned by the worker during that part of the period of 5 years ending on the prescribed date during which the worker was so remunerated.
• In calculating the payment of long service leave, the greater of the ordinary remuneration at the prescribed date or the ordinary remuneration averaged over the previous 5 years is used and multiplied by number of weeks of long service leave being paid for. 
• In calculating the payment of long service leave, only weeks where a worker works and is paid should be included in calculations for ordinary remuneration. This means unpaid absences, such as parental leave or unpaid sick leave should not be included in the 5 year average ordinary remuneration calculation.

For example, Jenny is a part time worker who is contracted for 20 hours a week, but regularly works more than 20 hours.  

When calculating Jenny’s pay for long service leave Jenny’s employer:

• Works out her average weekly hours over the last twelve months which is 27 hours per week and her average weekly hours over the last 5 years which is 25.5 hours. This means her deemed hours are 27 hours. Her current payrate is $25 per hour so her ordinary remuneration as at the day before she takes the leave is $675 per week.
• Her payrate increased every year in line with her award. Her ordinary average remuneration over 5 years is less than her ordinary average remuneration on the prescribed date, so they use the rate of $675 per week to pay her long service leave.

For workers who are remunerated otherwise than wholly in relation to an ordinary time rate of pay (such as paid wholly by commission or paid on the completion of particular work, e.g. piece workers), long service leave pay is based on whichever is the greater:

• the average weekly wage earned during the previous 12 months (excluding any weeks of unpaid absences), or
• the average weekly wage earned during the previous 5 years (excluding any weeks of unpaid absences).

Shift work, other penalty rates and overtime payments are not included in the ordinary time rate of pay. Skills based allowances are included in the ordinary time rate of pay.

In addition, bonuses and commissions (including incentives or other similar schemes) received by the worker are averaged over the previous 12 months ending on the day prior to the leave being taken (or averaged over the previous 5 years if the 5 year average pay rate is used) and added to the weekly rate used to calculate the leave payment.

However, bonuses and commissions paid to workers who are otherwise paid in excess of $175,000 annually are not included (this figure is adjusted annually on 1 July).

When calculating this average, an employer divides the total amount of bonuses and commissions received by the worker over the previous 12 months by 52 weeks or over the previous 5 years by 260 weeks, i.e., you do not exclude weeks of unpaid absences from this calculation.

Before taking long service leave, the worker may, with the agreement of the employer, be paid in full for the leave or at the same time as their regular pay intervals if they had remained on duty, or in any other way agreed between the employer and the worker.

Generally, work related allowances are included in the ordinary time earnings. These are:

• all-purpose allowances, (e.g., site allowance) are an hourly rate which is added to the workers hourly rate and are therefore already considered to be part of the ordinary time rate of pay.
• skill related, (e.g., leading hand allowance, first aid allowance) should be included in the calculation of ordinary pay.

Expense allowances, (e.g., meal allowance, phone allowance) should not be included in the calculation of ordinary pay.

Where a worker worked reduced hours as a result of a JobKeeper enabling direction, those periods should not be included in the calculation of average weekly number of hours.

A JobKeeper enabling direction occurs when a direction is given by the employer to the worker to reduce their hours and the direction to work reduced hours is given because a worker could not be usefully employed on their normal hours because of:

• the pandemic or
• because of government initiatives to curb infection, such as health orders.

In addition, the direction to reduce hours must have occurred in a period when:

• the employer qualified for JobKeeper OR had a 10% decline in turnover certificate, and
• the employer was paid JobKeeper in relation to the worker

NB: It is not necessary that the JobKeeper payment was actually passed onto the worker by the employer. Employers should be aware that they were under an obligation to provide the Job Keeper enabling direction in writing.

It is important to identify both an employer’s eligibility and that the employer was paid JobKeeper in relation to a worker because:

• An employer’s eligibility for JobKeeper and the reason for the direction to reduce hours are not enough to determine that a JobKeeper enabling direction applied to a worker.
• An employer’s eligibility for the JobKeeper scheme and an employer being paid JobKeeper for a particular worker are different and separate events.
• An employer may not have been eligible to be paid JobKeeper for a worker who:
  • did not agree to be nominated for JobKeeper
  • was not an Australian resident
  • was a casual worker who was not employed on a regular and systematic basis during the 12-month period that ended 1 July 2020
  • was a permanent worker for another employer or nominated another employer to be paid JobKeeper for them.

If it is a day the worker would have received payment for had they not been on long service leave they should receive payment and an extra day must be added to the long service leave.

There is no provision for the employer or the worker to make any arrangements or agreements for the cashing out or payout of accrued long service leave whilst the worker is still employed. The LSL Act provides for the taking of accrued long service leave if the worker is currently employed.  Accrued or unused long service leave entitlements are only paid out upon termination of employment.

Workers in the building and construction industry and the contract cleaning industry may be eligible for portable long service leave. For more information contact the Long Service Corporation on 13 14 41 or visit their website www.longservice.nsw.gov.au

NSW Industrial Relations is unable to assist in the recovery of entitlements to workers whose employer has gone into liquidation. Workers need to make a claim with the Receiver. For more information about receivership, please contact the Australian Securities and Investment Commission (ASIC) on 1300 300 630, or visit their website at: https://asic.gov.au/

The Fair Entitlements Guarantee (FEG) provides assistance to workers who have lost their employment due to the insolvency or bankruptcy of their employer, and who are owed certain worker entitlements. For more information, please call 1300 135 040 or visit their website at: https://www.dewr.gov.au/fair-entitlements-guarantee

Details of all long service leave taken, accrued and transferred from previous employer(s) must be recorded accurately on the worker’s service record.

For casual workers, records of why they have “zero hour” weeks should also be kept.

If an employer is buying or selling a business and workers are transmitting with the business, ensure that time and wages records are transmitted as well.

Where any breach of the LSL Act can be established, NSW Industrial Relations is able to impose various sanctions. These include: a Formal Caution, Penalty Notice and Notice to Employer. We may also recommend prosecution action, where appropriate. More information can be found in our Complaints Handling Policy.