Victoria Long Service Leave: Important Changes

In a move benefitting workers, especially women, parents, and carers, the Victorian government recently passed the Long Service Leave Act 2018, repealing and replacing its previous 1992 incarnation. Having received the Royal Assent, the act came into effect on 1 November 2018, and brings changes, most significantly, to the way parental leave is accrued and implemented in Victorian workplaces.

If you’re not yet familiar with the details of Long Service Leave (LSL) Act 2018, now is the time to bring yourself, and your payroll department, up to speed...

The Right to Take Leave

One of the most significant aspects of the new LSL Act 2018 is the change it makes to LSL entitlement. Under the 1992 Act, employees in Victoria did not have the right to take long service leave until they had completed 10 years of continuous service (although they may come to a mutual agreement with their employers). If an employment ended after 7 years of continuous service, the departing employee was entitled to a pro rata payment of their entitlement to LSL.

Under the 2018 Act, employees are entitled to LSL after 7 years of continuous service. This threshold brings LSL entitlement into line with the point at which it is actually paid.

The 2018 Act also entitles employees to LSL for single day periods - as opposed to the previous requirement that the entire entitlement be taken in a single period. Employers also may not refuse an employee’s request for LSL as long as that request is practicable and there are no business-related grounds to refuse.

Establishing Continuity of Employment

• Parental Leave: While the previous act did not count unpaid parental leave towards continuous service, the 2018 LSL Act now counts any amount of unpaid parental leave up to 52 weeks. Leave taken beyond the 52 week threshold, while not considered continuous service, will count as continuity of employment.
• Business Transfers: The LSL Act 2018 defines business assets as both tangible and intangible - so that both count towards an employee’s continuity of employment when assets are transferred from one employer to a new employer.
• Resignation & Termination: Employees who resign, or are terminated by their employers, but re-employed within 12 weeks, are counted as having continuity of employment. Previously, only resignations were regarded as continuous.

Calculating LSL

The 2018 LSL Act introduces new rules for calculating leave for employees without fixed work hours who request LSL. The new rules stipulate that ‘average work hours’ are to be calculated by taking whichever is the greater average amount from an employee’s last 12 months, last 5 years, or the entire continuity of employment.

The same calculation method is applied for employees whose work hours have changed prior to their LSL - for a period of up to 24 months (as opposed to the previous 12 month threshold).

Enforcing LSL Rules

Previously, employers had a right to apply to the Magistrate’s Court Industrial Division for an exemption to the LSL Act. Under the rules introduced in 2018, this right is abolished (however, exemptions already in place will continue). Similarly, the new act has expanded the powers of authorised officers: employers must comply with investigative requests from authorised officers and any notices issued to produce information or documents which pertain to LSL.

Importantly, while non-compliance with the 1992 Act could result in potential civil penalties, the updated act now considers LSL offences to be criminal acts. Failure to pay LSL could incur serious financial penalties - the most serious offences could result in 60 penalty units, which currently translates to $9,514.20.

What Should Employers Do Now?

The LSL Act 2018 will be introduced on 1 November 2018, so it’s now critical that employers review their current payroll systems to ensure compliance (if they have not already done so). Payroll administrators should be trained to pay special attention to parental leave requests - and be able to ensure compliance over the long term by auditing LSL records. If your payroll solution is outsourced, consult with your service provider to clarify any uncertainty.

For more information about leave in Australian payroll, check out activpayroll’s Global Insight Guide to Australia.