Long Service Leave FAQs

Under some circumstances a worker who has completed 5 years (but less than 10 years) of service may be entitled to a long service pro-rata payment if he or she:

• resigns on account of illness, incapacity, domestic or other pressing necessity; or
• is dismissed for any reason other than serious and wilful misconduct; or
• dies

The Long Service Leave Act 1955 does not define “domestic or other pressing necessity”. The test to determine whether a domestic or other pressing necessity exists is subjective and involves the examination of the claimant’s state of mind and an assessment of whether they can demonstrate that they genuinely considered themselves to be under a domestic or other pressing necessity.

An approach taken by the courts identified the following principles in determining whether a domestic or other pressing necessity exists: 

1. Was the reason claimed for termination one which fell within the section dealing with pro rata entitlement?
2. Was such reason genuinely held by the worker and not simply a rationalisation?
3. Although the reason claimed may not be the sole ground which caused the worker to decide to resign, was it the real or motivating reason for it?
4. Was the reason such that a reasonable person in the worker’s position might have felt compelled to resign?

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

A break in a worker's service will not affect the continuity of service or the calculation of service in the following circumstances:

1. The absence of the worker is under the terms of the worker’s employment
2. The absence of the worker is on account of illness or injury.

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

3. Made by the employer with the intention of avoiding any obligation imposed on the employer by the Long Service Leave Act 1955 or by any obligation in relation to sick leave imposed on the employer by a State industrial instrument
4. Arising from an industrial dispute
5. Made by the employer by reason of slackness of trade
6. Arising from the absence of the worker for any cause by leave of the employer
7. 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.

NOTE - A resignation by the worker breaks continuity of service.

Parental Leave for national system workers is provided for under Division 5 Part 2-2 and related provisions of the Fair Work Act 2009. These provisions are extended to non-national system employees under Section 744 of the Fair Work Act 2009.

Section 22 of the Fair Work Act 2009 defines the meaning of service and continuous service.  Under this section any period of unpaid leave or unpaid authorised absence (such as parental leave) does not break a national system worker’s continuous service with his or her national system employer but does not count towards the length of the worker’s continuous service.

Example: If a worker was employed for 10 years and took a total of 20 months of parental leave, the worker would need to work a further 20 months to have served the 10 years necessary to accrue the long service leave entitlement.

In December 2022, the NSW Court of Appeal’s decision in Wipro Limited v State of New South Wales [2022] NSWCA 265 (Wipro Decision) clarified the way a worker’s service which was performed outside of NSW should be treated when assessing their long service leave entitlements.

If there are multiple periods of service in different places outside and inside NSW, each period of the worker’s service should be assessed to determine whether there is a substantial connection to NSW. 

This assessment should refer to the circumstances and factors known by the worker and the employer during and at the time of each of those periods of service. 

Only periods of service with a substantial connection to NSW will count as service for the purposes of the Long Service Leave Act 1955.

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

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

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

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,

the continuity of the worker's service is not considered to be broken.

Service with any previous owner(s) of the business is deemed to be service with the new owner.

The Long Service Leave Act 1955 ensured that a worker’s long service leave continued to accrue if they were stood down without pay between 11 March 2020 and 31 March 2022 as a direct or indirect result of the COVID-19 pandemic.

Long service leave continued to accrue for any period affected by a JobKeeper enabling direction (such as reduced hours including to zero hours) as if the JobKeeper enabling direction had not been given.

Refer to FAQ 15 for more information about how JobKeeper enabling directions affect your “ordinary pay” if you had your hours reduced due to Covid-19.

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.

The Long Service Leave Act 1955 provides full-time, part-time and casual workers in NSW 2 months (8.6667 weeks) paid long service leave on completion of 10 years service with the same employer and one month of paid leave for each additional 5 years service.

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) i.e., the 10 year entitlement. At 15 years, if the worker remains with the same employer there will be an entitlement to a further 1 month or 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 9.

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

The Long Service Leave Act 1955 allows an employer and a worker to agree to taking leave in advance in 2 or more separate periods of not less than one day.

There are several ways this may work in practice, for example, by agreement, the worker may decide to work 3 days and take 2 days long service leave in a particular week.

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 recouped by the employer.

The Long Service Leave Act 1955 (the Act) requires that leave is to be given by the employer and taken by the worker as soon as practicable, having regards to the needs of the employer’s establishment.  The employer can propose that the worker take a period of long service leave by giving 1 months notice (or less if the worker agrees). 

Situations may arise where mutual agreement is unable to be reached and operational or other business circumstances require that the leave is taken by the worker at a particular time. 

The employer must demonstrate they have followed all requirements of the Act in the first instance including their attempts to reach mutual agreement with the worker regarding the taking of long service leave. 

Where no agreement is reached following reasonable attempts, the employer may give the worker a lawful and reasonable direction regarding the taking of long service leave with a reasonable period of notice. What constitutes a lawful and reasonable direction will depend on the particular circumstances in which the direction is being given, such as the steps the employer has taken to try and reach agreement. Independent legal advice should be sought about whether the direction is lawful and reasonable. 

Refer to FAQ 7 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 highest rate: 

• 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). 

For workers who have no fixed weekly number of hours of work (such as casual work) the normal weekly number of hours are calculated to be whichever is the highest rate:

• the average weekly number of hours worked during the previous period of 12 months ending on the day prior to the leave being taken, (excluding any weeks of unpaid absences*), or 
• the average weekly number of hours worked during the 5 years ending on the day prior to the leave being taken, (excluding any weeks of unpaid absences*). 

*unpaid absence: generally, exclude any weeks of approved unpaid absences or weeks where the worker notified that they were not available to work), for more information refer to FAQ 14.

For workers who are remunerated otherwise than wholly in relation to an ordinary time rate of pay, such as piece workers or commission only workers, long service leave pay is based on whichever is the highest rate:

• 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).

For more information on unpaid absences refer to FAQ 2 (Service) and FAQ 14 (Ordinary remuneration and average weekly hours of work). 

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

Bonuses and Commissions

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 $167,500 annually are not included (This figure is adjusted annually on 1 July).

When calculating this average, you would divide 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.

Generally, work related allowances which are skill related, (e.g., leading hand allowance, first aid allowance) are included in the calculation of ordinary pay. Generally, expense allowances, (e.g., meal allowance, phone allowance) are not included in the calculation of ordinary pay. Please check your Award or industrial instrument to determine any allowances that are payable as part of the ordinary time rate of pay. Generally, all-purpose allowances are considered part of the ordinary time rate of pay.

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 $167,500 annually are not included (This figure is adjusted annually on 1 July).

When calculating this average, you would divide 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.

Average Weekly number of hours of work Calculation

1. For workers without fixed normal weekly number of hours, when calculating the average weekly number of hours during the period of 12 months or 5 years ending on the day prior to the leave being taken, approved unpaid absences requested by the worker or where the worker has notified the employer that they are unavailable to work will be excluded from the 12 months or 5 year average. However, any periods where the worker was required to hold themselves ready, willing and able to work under the terms of their contract, but were not required to work by the employer would be included in the 12 month or 5 year average.

2. For workers with fixed normal weekly number of hours, there is no need to perform the average weekly number of hours calculation before doing the ordinary remuneration calculation.
3. NB: Once the average weekly number of hours has been calculated, this figure will be used to calculate the worker’s ordinary remuneration.

Ordinary Remuneration Calculation

4. 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.

JobKeeper payment does not affect the accrual of long service leave.

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.

Why we need to know both an employer’s eligibility and that the employer was paid JobKeeper in relation to a worker:

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

An extra day must be added to the long service leave, if it is a day the worker would have received payment for had they not been on long service leave.

The Long Service Leave Act 1955 provides for the taking of accrued long service leave. There is no provision for ‘cashing out’ of entitlements.

In NSW, the Long Service Leave Act 1955 may not apply if the employer is respondent to a pre reform federal award or is a member of an employer association (for example the Motor Traders Association) that made them respondent to a pre reform federal award.

This is because some pre reform federal awards provide for long service leave (see clause 4 of Part III of the federal Metal, Engineering and Associated Industries Award 1998) or there may be a separate long service leave award (see Vehicle Industry - Repair, Services and Retail - (Long Service Leave) Award 1977). 

Other federally registered agreements may also provide long service leave entitlements. 

If you are unsure, we recommend that you check with the Fair Work Ombudsman on 13 13 94 or visit their website www.fairwork.gov.au.

Special conditions may apply to workers in the building and construction industry and the contract cleaning industry. For more information contact the Long Service Corporation on 13 14 41 or visit their website www.longservice.nsw.gov.au

Long service leave in the black coal mining industry is administered by the Coal Mining Industry (Long Service Leave Funding) Corporation, an Australian Government agency.

The Coal Mining Industry (Long Service Leave Funding) Corporation may be contacted on 1300 852 625 or through their website www.coallsl.com.au