Understanding long service leave: entitlements, continuous service and how to calculate leave

Long service leave is a paid entitlement for Australian employees who remain with the same employer for an extended period. Each state sets different rules on eligibility, accrual rates and payments. This guide explains how long service leave works, who qualifies and how businesses can manage it effectively.[ez-toc]

A quick guide to long service leave

Long service leave is a paid leave entitlement for Australian employees who have worked with the same employer for a long period. Most states require 7 to 10 years of continuous service. Employees can take leave or receive a payout if they leave under certain conditions. Employers must follow state laws to manage leave correctly.

What is long service leave?

Long service leave (LSL) is a workplace entitlement in Australia. It rewards employees who stay with the same employer for an extended period. After several years of continuous service, employees can take paid leave.Each state and territory has different long service leave laws. These laws set the minimum period an employee must work before they are entitled to long service leave. In most cases, employees become eligible after 7 to 10 years of continuous service. Some states allow pro-rata long service leave if an employee leaves after a certain period.

Why long service leave matters for employers

Long service leave is not just a benefit for employees. It also helps businesses by:

• Encouraging staff loyalty – Employees are more likely to stay long-term when rewarded for their service.
• Reducing turnover costs – Replacing experienced employees is expensive. LSL helps retain skilled staff.
• Improving workplace morale – Employees who feel valued are more engaged and productive.
• Meeting legal obligations – Employers must follow state-based LSL laws to avoid penalties.
• Managing workforce planning – Knowing when employees are likely to take long service leave helps with staffing.

Employers should track long service leave entitlements carefully. A clear LSL policy ensures compliance and helps both employers and employees plan ahead. Business Kitz Leave Policy template can help get you started!

Understanding continuous service and absence from work rules

Continuous service is the time an employee works for an employer without a significant break. It includes both full-time and part-time work. Continuous service is important because it affects an employee’s entitlement to long service leave.Most states and territories require 7 to 10 years of continuous service before an employee can take long service leave. If an employee’s service is interrupted, it may impact how long service leave is calculated. Some breaks count towards accrual, while others pause or reset the service period.

How absence from work affects long service leave

Some types of leave count towards continuous service, while others do not.1. Paid leave (counts as service)

• Annual leave.
• Personal leave (sick or carer’s leave).
• Compassionate leave.
• Parental leave (in some states).
• Long service leave already taken.

2. Unpaid leave(may pause service)

• Parental leave (in most states).
• Unpaid leave longer than a set period.
• Extended unauthorised absences.

If an employee takes unpaid leave for an extended period, it may pause their accrual of long service leave. The rules vary between states.

How different states treat continuous service interruptions

Each state has different rules about what breaks continuous service. The table below outlines some key differences. Employers should check specific eligibility requirements for long service leave and pro-rata entitlements.State/TerritoryPaid leave countsUnpaid leave affects accrualPro-rata entitlementVictoriaYesMay pauseAfter 7 yearsNew South WalesYesMay pauseAfter 5 years (if employment ends)QueenslandYesMay pauseAfter 7 years (if employment ends)Western AustraliaYesMay pauseAfter 7 years (if employment ends)South AustraliaYesMay pauseAfter 7 yearsTasmaniaYesMay pauseAfter 7 yearsAustralian Capital TerritoryYesMay pauseYesNorthern TerritoryYesMay pauseAfter 7 yearsEmployers should check their state’s long service leave legislation to understand how absence from work affects employee entitlements. Keeping accurate records helps avoid disputes and ensures compliance with long service leave laws.

Eligibility: When can employees take long service leave?

Employees can take long service leave once they meet the required years of continuous service. The qualifying period varies between states which is usually between 7 and 10 years, and some employees may be eligible for pro-rata long service leave if they leave before reaching the full period. Understanding these rules helps employers plan leave effectively.

Pro-rata long service leave

Employees who leave before reaching the full qualifying period may still receive pro-rata long service leave. This depends on:

• The length of their continuous service.
• The reason for leaving (e.g., resignation, redundancy, retirement).
• State-specific rules.

For example, in Victoria, an employee who resigns after 7 years of service may receive a pro-rata payment of long service leave. In New South Wales, pro-rata applies if an employee leaves after 5 years for certain reasons.

Industry-specific exceptions

Some industries have portable long service leave schemes. These allow employees to accrue long service leave while working for different employers in the same industry. Common industries include:

• Construction.
• Security.
• Cleaning.
• Community services.

Workers in these industries may be entitled to long service leave even if they change jobs.

Employer obligations

Employers must:

• Approve long service leave requests when an employee is eligible.
• Ensure employees take long service leave in accordance with the law.
• Keep accurate records of service and leave balances.
• Pay long service leave correctly when an employee takes leave or leaves the business.

Employers should understand their obligations under relevant long service leave legislation to avoid disputes. Clear policies help businesses manage long service leave purposes effectively.

Accruing long service leave: How does it work?

Each state sets its own accrual rate and rules. Full-time, part-time and casual employees may accrue leave at different rates. Understanding these rules helps businesses manage leave balances and avoid financial strain.

Accrual differences for full-time, part-time and casual employees

• Full-time employees accrue long service leave based on ordinary hours worked.
• Part-time employees accrue leave at a pro-rata rate based on their hours.
• Casual employees may accrue long service leave if they meet the state’s definition of continuous service. Some states count regular and systematic casual work as eligible service.

Managing long service leave accruals

Employers must plan for long service leave costs. Unused long service leave can become a financial burden if not managed properly. To reduce risk:

• Encourage employees to take long service leave when eligible.
• Regularly review and update leave policies.
• Keep accurate records of each employee’s accrued long service leave.

Using digital tools to track leave accrual

Tracking long service leave manually can lead to errors. Digital payroll and HR systems help businesses:

• Automatically calculate long service leave accrual for all employees.
• Monitor leave balances to ensure employees take long service leave on time.
• Generate reports for financial planning.

A structured approach to long service leave accrual helps businesses stay compliant and avoid unexpected costs.You can automate your business processes further with Business Kitz! Generate contracts from scratch, gain access to over 100 document templates, securely store documents and data, digitally sign contracts and manage employee data all in one secure location. Sign up today!

Understanding long service leave laws across Australian states

Long service leave laws vary across Australia. Each state and territory sets its own rules for the qualifying period, accrual rate and eligibility. Employers must follow the laws in their state to ensure compliance and avoid disputes.

State-by-state comparison of long service leave laws

The table below outlines the key differences in long service leave entitlements across states and territories.State/TerritoryQualifying periodAccrual ratePro-rata entitlementVictoria7 years1 week per 60 weeksYesNew South Wales10 years8.67 weeks per 10 yearsAfter 5 years (if employment ends)Queensland10 years8.67 weeks per 10 yearsAfter 7 years (if employment ends)Western Australia10 years8.67 weeks per 10 yearsAfter 7 years (some cases)South Australia10 years13 weeks per 10 yearsAfter 7 yearsTasmania10 years8.67 weeks per 10 yearsAfter 7 yearsNorthern Territory10 years13 weeks per 10 yearsAfter 7 yearsAustralian Capital Territory7 years6.0667 weeks per 7 yearsYes

Key differences in long service leave laws

• Qualifying periods vary: Some states allow leave after 7 years (Victoria, ACT) while others require 10 years (NSW, QLD, WA).
• Accrual rates differ: Most states provide 8.67 weeks per 10 years, but South Australia and the Northern Territory offer different entitlements.
• Pro-rata leave varies: Some states allow employees to access pro-rata long service leave if they leave after 5 or 7 years.

Why businesses must check state-specific legislation

Employers must comply with long service leave laws in the state where their employees work. The relevant long service leave legislation in each state and territory outlines employer obligations, employee entitlements and accrual rules.Employers should:

• Check relevant legislation in their state or territory.
• Keep updated on changes to long service leave laws.
• Use digital payroll systems to track accrual and payments correctly.

By following the correct legislation, businesses can ensure compliance and minimise legal risks.

Payment for long service leave: What employers need to know

Employers must calculate and process long service leave payments correctly. Payments depend on the employee’s work type, average earnings and when they take the leave. Understanding these rules ensures compliance and avoids disputes.

How long service leave payments are calculated

Long service leave payments are based on an employee’s ordinary pay, penalty rates or average earnings. The calculation method depends on the state’s long service leave legislation and the employee’s pay structure.Employers usually calculate payments using:

1. Ordinary pay – Base rate excluding bonuses, overtime and allowances.
2. Average weekly earnings – The higher of:
   • The employee’s average earnings over the last 12 months.
   • The employee’s average earnings over the last 5 years (if required by state laws).

If an employee's hours have changed over time, employers use the average hours worked to calculate their long service leave entitlement.

Step-by-step process for calculating long service leave

1. Confirm the employee’s eligibility - Check if the employee has met the qualifying period (usually 7 to 10 years of continuous service).
2. Determine the accrual rate - Each state has a set accrual rate (e.g., 8.67 weeks per 10 years in most states).
3. Calculate the total leave accrued - Use the formula: (Total years of service ÷ Qualifying period) × Accrual rate.
4. Convert leave into payable weeks - Multiply the accrued leave by the employee’s ordinary weekly hours.
5. Check payment rates - Calculate the payment for long service leave based on the employee’s average earnings.

When long service leave must be paid

Employers must pay long service leave in full when:

• An employee takes long service leave.
• An employee retires, resigns or is dismissed (if eligible).
• A business is sold and a new owner does not recognise prior service.

In some cases, employees may choose to take long service leave at half pay. This allows them to double their leave period while receiving half their usual pay.

Tax implications for employers and employees

Long service leave payments are taxable income. Employers must:

• Withhold the correct PAYG tax based on the payment type.
• Apply different tax rates for leave taken during employment vs leave paid on termination.
• Report payments correctly on the employee’s income statement.

Employees may face higher tax rates if long service leave is paid as a lump sum on termination. Employers should advise staff to seek financial advice if needed.Correctly handling long service leave payments helps businesses meet legal requirements and avoid payroll errors.

Long service leave on termination: What happens to accrued leave?

When employment ends, an employee may be entitled to long service leave. The rules for final payouts depend on the length of service, the reason for termination and state laws. Employers must follow these rules to ensure compliance.

What happens to accrued long service leave when employment ends?

If an employee has completed the required years of continuous service, they must receive a payout for their accrued long service leave. The payout is based on their ordinary rate of pay at the time of termination.If an employee has not yet reached the full qualifying period, they may still receive a pro-rata long service leave payment depending on the circumstances of their departure.

Conditions for pro-rata payments

Some employees can receive pro-rata long service leave if they leave before completing the full qualifying period. The eligibility depends on the reason for leaving and the relevant long service leave laws.Reason for terminationPro-rata LSL entitlementResignationYes, in some states after 5–7 yearsRedundancyYes, after 7 yearsDismissal (not for misconduct)Yes, after 7 yearsRetirementYes, after 7 yearsDismissal for serious misconductNoEmployers should check their state’s long service leave rules to confirm employee entitlements.

Employer obligations for final long service leave payouts

Employers must:

• Calculate long service leave correctly based on the employee’s final pay rate.
• Include the payment in the employee’s final payslip.
• Withhold the correct tax according to ATO rules.
• Provide accurate records of the leave payout.

If a business is sold, the new owner may choose to recognise the employee’s prior service. If not, the previous employer must pay out unused long service leave.Handling long service leave on termination correctly ensures compliance and avoids disputes. Employers should keep clear records and follow the law in their state.

Casual and part-time employees: Understanding their LSL entitlements

Casual and part-time employees may be entitled to long service leave under certain conditions. Their eligibility depends on their work pattern, length of service and state laws.

Can casual employees qualify for long service leave?

Yes, casual employees can qualify for long service leave if they meet the continuous employment for long service requirements. Even though casual employees do not have guaranteed hours, long service leave laws may still count their service if they work regularly and systematically for the same employer.To be eligible, casual employees must:

• Work for the same employer over a long period without significant breaks.
• Show an ongoing and consistent work pattern.
• Meet the state’s qualifying period (usually 7 to 10 years).

If a casual employee takes an extended break that does not count as service, it may affect their entitlement to long service leave.

Differences in LSL for casual and regular part-time employees

• Part-time employees accrue long service leave at a pro-rata rate based on their hours worked.
• Casual employees must show a regular and systematic work pattern to be eligible.
• If a casual or seasonal employee does not work consistently, their service may not count.

State-specific variations in casual employee entitlements

Each state has different rules for casual employees. Employers should check their long service leave legislation and rules to confirm eligibility for casual and regular part-time employees.Keeping clear records ensures accurate long service leave calculations and helps avoid disputes. Sign up to a free Business Kitz account to securely store leave records, contracts and important company documentation with our Document vault and gain access to many more features to streamline your business processes.

Understanding portable long service leave schemes

Portable long service leave allows workers to accrue entitlements even when they change employers within the same industry. Unlike standard long service leave, which applies to continuous service with one employer, portable schemes track service across multiple employers.These schemes benefit industries where employees often switch jobs but remain in the same field. Employers in covered industries must register with the relevant state authority and pay levies to fund the scheme.

How portable long service leave works

Portable long service leave:

• Allows employees to build up leave entitlements while working for different employers in the same industry.
• Applies only to specific industries covered by state laws.
• Is funded by employer contributions rather than direct leave accrual.

When an employee becomes eligible for long service leave, they can take paid leave through the industry’s portable long service leave agency rather than relying on a single employer.

Industries covered by portable long service leave

Portable long service leave applies to industries with high job mobility. Covered sectors include:

• Construction
• Security
• Cleaning
• Community services
• Passenger transport (some states)

Each state sets its own rules. For example, Business Queensland manages portable long service leave for construction workers, while Victoria covers multiple industries under its scheme.

How businesses can register and comply

Employers in covered industries must:

• Register with the relevant portable long service leave authority.
• Report employee work hours and service details regularly.
• Pay a levy to fund the scheme.

Failure to comply may lead to penalties. Employers should check their state’s regulations to ensure proper registration and contribution payments.

Unpaid leave and its impact on long service leave entitlements

Unpaid leave can affect an employee’s long service leave entitlement depending on the type of leave and state laws. While some unpaid leave counts towards continuous service, extended absences may pause or reset accrual. Employers must understand how different types of leave impact long service leave calculations.

How different types of unpaid leave affect long service leave accrual

The long service leave act in each state outlines how unpaid leave impacts accrual. In general:

• Short-term unpaid leave (personal reasons, study leave)
  • May not break continuous service.
  • Often does not count towards accrual of long service leave.
• Unpaid parental leave
  • May pause the accrual period but not break continuous employment for long service leave.
  • Some states allow limited parental leave to count towards accrual.
• Unpaid sick leave due to illness or injury
  • Some states count this towards accrual if the employee remains employed.
  • Extended leave may require employer approval to maintain eligibility.
• Extended unpaid absences (career breaks, unpaid sabbaticals)
  • Often pause accrual and may break continuous service if the absence exceeds a set period.

State-by-state rules on unpaid leave and long service leave eligibility

Each state applies different rules for unpaid leave. Employers must check their state’s laws to confirm how unpaid leave impacts long service leave in accordance with local legislation.

Examples showing real-world impact

• Example 1: Unpaid parental leave in Victoria
  • Sarah worked for 8 years before taking 12 months of unpaid parental leave.
  • Her employer confirmed the leave did not count towards accrual, so she had to work another year to qualify for long service leave purposes.
• Example 2: Unpaid sick leave in Queensland
  • John took 6 months of unpaid sick leave after an injury at work.
  • Because his illness or injury was not covered by paid leave, his long service leave accrual paused but his continuity of service remained intact.

Employers should review long service leave laws to ensure compliance and clear communication with employees. Keeping accurate records of unpaid leave helps avoid disputes over long service leave entitlements.

Managing long service leave to reduce business risk

Long service leave is a legal requirement, but poor management can create financial strain for businesses. Large leave balances increase liabilities and make it harder to plan staffing. Employers must take a proactive approach to reduce risk.

Risks of excessive long service leave accruals

When employees delay taking long service leave, their entitlements build up. This can create several problems for businesses:

• Higher financial liability – Large leave balances mean bigger payouts if multiple employees take leave or leave the business at the same time.
• Cash flow issues – Paying out large amounts of accrued leave at once can strain finances.
• Workplace disruptions – If multiple employees take long service leave at the same time, it can impact operations.
• Increased payroll costs – Leave accrued at lower pay rates must be paid out at the employee’s current rate, leading to higher costs over time.

How to structure leave policies to minimise financial liabilities

Employers can reduce financial risk by encouraging employees to take leave regularly. Effective policies should:

• Set clear guidelines – Define when and how employees can take long service leave.
• Encourage leave planning – Ask employees to plan leave in advance to balance staffing needs.
• Limit large accruals – Some businesses set a cap on how much long service leave employees can accrue before they must take it.

Best practices for proactively managing long service leave balances

• Use payroll software – Track accruals and remind employees when they qualify for leave.
• Schedule leave rotations – Ensure not all employees take long service leave at the same time.
• Plan for payouts – Set aside funds to cover long service leave payments.
• Monitor compliance – Keep updated on changes to long service leave laws to avoid penalties.

By managing long service leave properly, businesses can reduce financial risk and maintain smooth operations.

Frequently asked questions about long service leave

How do you make a claim for long service leave?

Employees can make a claim if they meet the years of continuous service requirement under their state’s long service leave legislation The process depends on state laws and employer policies. If disputes arise, the Fair Work Ombudsman can assist.

Do casual and regular part-time employees get long service leave?

Yes, casual and regular part-time employees may have an entitlement to long service leave. In some states, employees must show a regular work pattern over a period of continuous service. Each state has different rules, so casuals should check long service leave legislation to confirm their rights.

How do you calculate long service leave?

To calculate long service leave, multiply the employee’s total period of service by the accrual rate for their state. The amount of long service leave varies, but a full-time worker who has completed ten years of service may receive seven weeks’ long service leave depending on the state or territory. Employers should check the correct formula in accordance with applicable legislation.

How does the accrual of long service leave work?

The accrual of long service leave depends on an employee’s period of continuous service. In most states, employees earn a set number of weeks of long service leave based on the hours they work. Employers must track accruals in accordance with applicable legislation to ensure compliance.

Can a casual employee get long service leave?

Yes, in some states, casual employees are entitled to take long service leave if they meet the long service leave eligibility conditions. Their service is not broken if they work regularly over a period of continuous service. Some states count gaps in employment if the employee maintains regular work in Australia and their continuing connection with the same industry.

What happens to long service leave on termination of employment?

If an employee qualifies for leave on termination of employment, the employer must pay out their weeks of paid long service leave. Employees may receive pro-rata long service leave if they resign after a certain period of service. Payments must follow state rules in accordance with applicable legislation.

What factors affect calculating long service leave entitlements?

Calculating long service leave entitlements depends on factors like job type, work hours and leave and absences from work. Some leave does not break continuous service, while long unpaid gaps may affect accruals. Employers must check state laws to ensure calculations.

Does unpaid leave affect long service leave?

Some types of leave and absences from work count towards continuous service, while others pause accruals. Deemed continuous under the act, paid leave usually counts, but unpaid leave may not. Employees should check how their period of paid leave affects their entitlement.

Who should you contact for more information?

For detailed advice, employees can contact the long service leave authority in their state. The leave agency in your state can clarify entitlements and ensure leave is managed in accordance with applicable legislation. If there is a dispute, legal advice may help.

Best practices for managing long service leave

Long service leave is a key entitlement for Australian employees. Employers must understand eligibility, accrual rules, and payment requirements to stay compliant. Each state has different laws, so businesses must check local regulations.Managing long service leave properly reduces financial risk and workplace disruptions. Encouraging employees to take leave when due helps prevent large payouts and manage cash flow efficiently. Using payroll software helps ensure accurate tracking and compliance with state laws.Business Kitz makes long service leave management simple. Our platform helps businesses manage employee data and improve compliance. Get started today to manage employee data and company policies with ease!Disclaimer: This content is intended to be used for educational and informational purposes only. Business Kitz does not offer legal advice and cannot guarantee the accuracy, reliability, or suitability of its website content for a particular purpose. We encourage you to seek professional advice from a licensed professional and verify statements before relying on them. We are not responsible for any legal actions or decisions made based on the information provided on our website.Unless expressly stated otherwise, all content, materials, text, images, videos and other media on this website and its contents are the property of their respective copyright owners.