Long service leave in NSW: when it accrues and the pro rata point

Who the 1955 Act covers

The Act draws its own line in section 5. Section 4, which gives the entitlement, does not apply to a worker in a class whose long service leave is provided for by an award or agreement that is more favourable to the worker than section 4, or by or under another Act (other than the Industrial Relations Act 1996). The Industrial Relations Commission may also exempt an employer for some of its workers, on any conditions it sets and subject to section 5A, if it is satisfied that the employer’s own scheme gives them benefits not less favourable than the Act’s and that the exemption is in their best interests. The exemption does not apply to a worker who, within three months after it takes effect or after starting work, whichever applies, tells the employer in writing that they choose the Act’s long service leave instead of the scheme (section 5(2)(c)). NSW Industrial Relations regulates long service leave only for workers the Act covers. Casual workers are included, as long as they have the qualifying period of continuous service with that employer.

Service is counted with one employer, and it must be continuous: the Act defines service as “continuous service, whether on a permanent, casual, part-time or any other basis, under one or more contracts of employment” (section 4(11)(a)). Time worked for the same employer outside NSW may still count, if that service has a substantial connection with NSW when it happens.

The years, marked

A month, for these purposes, is “4 and one-third weeks” (section 4(2)(a3)), and NSW Industrial Relations notes the entitlement is measured in weeks, not days or hours. Section 4(2)(a) sets the amounts.

1. 5 years

   The Act gives a proportionate amount, on the basis of 2 months for 10 years, “in the case of a worker who has completed with an employer at least five years service, and whose services are terminated by the employer for any reason other than the worker’s serious and wilful misconduct, or by the worker on account of illness, incapacity or domestic or other pressing necessity, or by reason of the death of the worker” (section 4(2)(a)(iii)). NSW Industrial Relations adds that a worker made redundant after at least 5 years’ continuous service is paid any accrued and untaken leave.

2. 10 years

   2 months, “in respect of 10 years service so completed” (section 4(2)(a)(i)(A)). Between 10 and 15 years, an employment that ends or ceases “for any reason” brings a proportionate amount on the basis of 3 months for 15 years (section 4(2)(a)(ii)).

3. Each 5 years after

   1 month for each further 5 years completed since the worker last became entitled. After 15 years, on termination, the years since the last entitlement are paid on the basis of 2 months for 10 years (section 4(2)(a)(i)(B) and (C)).

A pro rata entitlement, in NSW Industrial Relations’ words, is a payment made when employment ends instead of the worker taking the leave. Its page adds one exception at the 5-year mark: a worker with more than 5 but fewer than 10 years who is dismissed for serious and wilful misconduct is not entitled to it. Under section 4(5)(a), when employment ends other than by the worker’s death, leave the worker was entitled to, or that accrues on the ending, and has not taken is treated as begun on that day, and the employer must pay the worker’s ordinary pay for it in full straight away, less anything already paid for that leave.

Giving and taking the leave

• Notice. The employer gives at least one month’s notice of the date the leave is to start (section 4(10)), or less if the worker agrees to the shorter notice (section 4(10A)).
• In parts. An employer and worker may agree to the leave being taken in 2 or more separate periods of not less than 1 day (section 4(3AA)).
• In advance. By agreement, leave of not less than 1 day may be given and taken before the worker has become entitled to it (section 4(3A)).
• Separate from holidays. Long service leave is exclusive of annual holidays that fall during it (section 4(4)).

Two lines are firm. Long service leave cannot be cashed out: apart from payment when employment ends, the Act says payment “shall not be made by an employer to a worker in lieu of any long service leave” nor accepted by the worker (section 4(8)), and NSW Industrial Relations says giving or receiving such a payment is an offence. Not paying a worker the entitlement when it is due is also an offence, which can lead to court action and a criminal conviction.

When the business changes hands

Growth sometimes comes by buying a business, and its workers’ years come with it. Where a business, or part of one, passes from one employer to another and a worker moves across, section 4(11)(c) says the continuity of the worker’s service is “deemed not to have been broken by reason of the transmission”, and service with the earlier employer is deemed to be service with the new one. Section 4(13) treats a move between related corporations in a similar way. Corporations are related only when one is the holding company or a subsidiary of the other, or both are subsidiaries of the same holding company. When the worker enters into a contract of employment with the new corporation before, at the time of, or within two months after leaving the first, the service carries over, and the move does not count as the employment ending, either for the pro rata entitlement or for the payment of untaken leave on leaving.

NSW Industrial Relations draws out what that means for a buyer: the new employer is responsible for the worker’s whole entitlement, including service with previous employers, a sale contract cannot lawfully exclude it, and each transferred worker’s long service leave record passes from the old employer to the new one.

Records

Employers keep long service leave records throughout a worker’s service and for at least 6 years after the employment ends, whether by resignation, retirement or another kind of termination, and transfer them to a successor employer where that applies.

Workers in a portable scheme

Three industries run long service through portable schemes instead. Section 4(5A) of the 1955 Act bars an employer from giving long service leave to someone registered under the building and construction, community services or contract cleaning scheme Acts, unless that worker applies for it; section 4(5B) applies the same rule to a payment.