Australia’s long service leave laws are a mess

Do you, as an employer or as an employee, find it difficult to navigate and determine long service leave entitlements? Given the complex interaction between the relevant provisions in the National Employment Standards (NES), State and Territory laws and enterprise agreements, the answer is most likely a resounding yes.

Unfortunately, sensible and longstanding long service leave flexibilities which benefited employers and employees were removed through the Fair Work Act. In their place, a stop-gap measure was implemented on the understanding that the Government would confer with the states and territories in the development of a national long service leave standard.

This, however, has not occurred – and there is no sign that the Federal, State and Territory Governments will ever have the political will to agree on such a standard, given significant differences in entitlements in some States and Territories.

Ai Group has made detailed recommendations on this subject to the Productivity Commission’s Inquiry into the Workplace Relations Framework (see our submission, page 76). Broadly speaking, we believe Enterprise Agreements should be permitted to override relevant State and Territory long service leave laws, but the laws should be taken into account for the purposes of the Better off Overall Test (BOOT). This is the system that operated up to 31 December 2009, and it has obvious merit for employers and employees.

Ideally, more substantial reforms will be introduced. The Fair Work Act should be amended to implement a national long service leave standard within the NES. The standard should reflect the previous standard federal long service leave provisions, i.e. 13 weeks long service after 15 years of service, with pro-rata entitlements after 10 years. Employees would retain their existing accrued long service leave but all employees would accrue long service leave for the future at a rate which reflects the national standard.

The standard should include the ability to cash out long service leave by agreement in writing between the employer and an individual employee, and the ability to take long service leave in any number of periods which are agreed.

The national long service leave standard should oust the operation of State and Territory long service leave laws for employees covered by the Fair Work Act. It should also not contain a general exclusion for employers and employees covered by the existing portable long service leave schemes for the construction industry, the coal mining industry and parts of the contract cleaning industry.

The coverage of some of these schemes is extremely vague and problematic (e.g. the Victorian Construction Industry Portable Long Service Leave Scheme administered by CoINVEST), and their expansion is certainly not the answer to resolving the complexity with Australia’s long service leave laws. Effectively a tax on employment, they impose a significant cost burden on employers that impacts their ability to take on more employees.

Long service leave is intended to reward employees for long and faithful service with one employer and this intention needs to be retained. This is the one aspect of long service leave entitlements that we can all understand.

Are long service leave entitlements a cloudy area in your business? And which aspects of our recommendations do you support or oppose – and why? Share your opinions below.

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Ai Group's Head of National Workplace Relations Policy, Stephen Smith is responsible for workplace relations policy development and advocacy. He regularly represents industry’s views to governments and opposition parties, and in numerous inquiries and major cases. He is Special Counsel for, and Chairman of the Board of, Ai Group Workplace Lawyers, a national law firm operated by Ai Group.

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