Working out your employee’s long service leave (LSL) entitlement can be a minefield. With so many factors to consider when it comes to calculating this, it’s no wonder this task can be overwhelming.
To help clear up some of the common questions around LSL, we’ve put together a summary of important employment milestones and things to consider when it comes to LSL.
- Your employee has been employed for less than 5 years
Employee’s are not entitled to any LSL if they have completed less than 5 years of continuous service.
- Your employee has been employed between 5 and 10 years
Employee’s that have completed between 5 and 10 years of continuous service are entitled to a pro-rata payment, if:
- They are dismissed for any reason (except for serious and wilful misconduct), or
- They pass away.
Where the employee resigns due to illness, incapacity, domestic or other pressing necessity, they may be entitled to a pro-rata payment. Please refer to the NSW Government website and their LSL calculator (links below) for more details on this.
- Your employee has been employed for 10 years
Your employee (full-time, part-time and casual) is entitled to 2 months of paid LSL after completing 10 years of continuous service. They will also accrue one month of paid leave for every additional 5 years of service. There is a detailed guide on the NSW Government website that can help you calculate the LSL entitlement for your casual employees; we have included a link to this guide below.
If your employee is terminated or ceases work for any reason between 10 and 15 years, the 3 months of leave is paid to them on a pro-rata basis. After 15 years of service, only full years of service will count towards their LSL entitlement. Ie. if they have been employed for 16 years and eight months, only the 16 years completed will count towards their LSL entitlement.
- Paying your employee their LSL
Where your employee is only paid an ordinary time rate of pay, their LSL will be paid based on one of the below amounts, whichever is greater:
- Their ordinary rate of pay on the day before taking their LSL; or
- Their average weekly ordinary pay, based on the last 5 year period ending the day before the LSL is taken.
Where your employee has had fluctuating hours, received commissions, bonuses, or allowances during their service period, there are instructions on how to calculate their LSL rate of pay on the NSW Government website.
One question we have had recently is ‘can my employee cash out their LSL instead of taking it?’, and the answer is no. While your employee is still employed, there is no provision that allows for arrangements or agreements to be made between the employer and employee for cashing out LSL, they are only paid out in full, upon termination of their employment.
- How does LSL need to be taken?
Generally, LSL should be taken as 1 continuous period of leave however, it can be taken over 2 or more separate periods if you and your employee agree to this. It just can’t be taken in separate periods that are less than 1 day of leave.
Hopefully, this helps clear up some of those initial LSL queries you, or your employee, might have. As mentioned above, we’ve included links below to the NSW Government LSL FAQ page and LSL calculator to help you work out the LSL entitlements for your employees.
As always, please feel free to reach out to us if you have any questions about this, or if you need assistance with your LSL calculations.
https://www.nsw.gov.au/employment/rights-responsibilities/leave/long-service-leave
NB: Please note that this information is based on NSW legislation only, and long service leave legislation is other states and territories will vary.
