In Short
- Leave entitlements include annual leave, personal leave, and long service leave.
- Understanding entitlements ensures compliance with employment law.
- Employers must correctly calculate and record leave to avoid disputes.
Tips for Businesses
Ensure your business complies with employment laws by accurately calculating and recording employee leave entitlements. Stay informed about any changes to leave entitlements under the National Employment Standards (NES). This helps avoid potential disputes and ensures your employees receive the correct leave they are entitled to.
If you have recently purchased a business, you must consider the existing employees’ leave entitlements if they continue to stay on. Recognising and upholding these entitlements not only ensures compliance with legal standards but also promotes a strong relationship with your employees.
Employees who stay on despite the change in ownership often exhibit a high degree of loyalty. Therefore, to encourage their continued loyalty, you must ensure that you understand and uphold their entitlements, including those relating to:
- public holidays;
- personal/carer’s leave;
- parental leave;
- long service leave; and
- annual leave.
This article will go through how you can calculate your employees’ long service and annual leave entitlements.
Long Service Leave Entitlements
In Australia, employees are entitled to long service leave once they achieve a particular length of service with their employer. Most employees’ entitlement to long service leave is derived from state and territory long service leave legislation, with each law setting out when an employee becomes entitled to the leave and how it must be taken.
For example, as an employer, you owe an employee who has completed at least ten years of service two months (8.667 weeks) of paid long service leave in New South Wales (NSW). This entitlement applies to most employees in (NSW) who are:
- full-time;
- part-time; or
- casual.
Long Service Leave Entitlements in NSW
The rate that must be paid for this leave period should be the weekly wage the employees earn on an ordinary basis. For every five years after the initial ten years of service, NSW employees are also entitled to one month of long service leave. Long service leave is governed by NSW Industrial Relations.
Accordingly, when you calculate your employees’ accrued long-service leave entitlements, you need to consider the entire duration of their employment up to and including the day you purchased the business.
You should also note that the Long Service Leave Act 1955 (NSW) allows certain employees to be entitled to pro rata long service leave outside of this requirement. This is if their employment ends due to their:
- illness, incapacity or domestic necessity;
- termination for any reason other than serious and wilful misconduct; or
- death.
This means they will not need to fulfil the 10 years of service requirement. Instead, they will only need to fulfil a requirement of five years of service. You should keep this exception in mind if you have any employees who are in pressing circumstances to which the Act may apply.
How to Calculate Long Service Leave Entitlements in NSW
Firstly, you must find out how many weeks’ allowance you must pay. You can do this by:
- calculating the years that they have been employed by the business exactly (including decimals). The duration of employment will be from the day that they began working with the business up until and including the day that you officially purchased the business; and
- multiply the number of years of employment by 8.667.
You can then find out their long service leave entitlements by:
- multiplying the weekly allowance by the years of completed service as at the date of purchase; and
- deducting any period of long service leave that the employee may have already taken.
Finally, it would help if you calculated how much you will have to pay an employee during their long service leave. You can do this by multiplying the long service leave entitlement by the employee’s ordinary hours of weekly pay. Additionally, you should keep in mind that periods of unpaid leave and unauthorised absences will not count in the calculation.
If My Employee Qualifies for Long Service Leave, Do I Have to Pay Them Upon Termination?
If your employee qualifies for long-service leave and resigns, they are still entitled to claim it from you. Leave is assessed on any time accrued but not taken during their employment or that they accrue upon resignation.
Leave will be accrued until the termination date. As an employer, you must pay your employees their ordinary pay for the leave in full. You can deduct your employee’s payment to reflect any partial long-service leave they have taken.
What Happens if an Employee Passes Away?
If an employee passes away and is entitled to long-service leave, you must still fulfil your obligations. Upon request of the deceased’s personal representative, you are required by law to pay the representative the ordinary wages that would have been payable to the worker. This does not include partial long-service leave taken by the employee.
Annual Leave
In addition, you will need to provide your employees with annual leave. This type of leave accrues with every year of service, according to the employee’s ordinary hours.
For example, you must grant full-time employees four weeks of annual leave for every year of service. In contrast, part-time employees will be entitled to annual leave on a pro-rata basis.
It is worth noting that when employees take annual leave, they continue accruing annual leave while they are away.
Employment agreements may change these leave entitlements, but they can only grant employees more leave than necessary under the law. They cannot remove leave entitlements prescribed under law.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
How to Calculate Annual Leave Entitlements
To calculate annual leave, you must:
- multiply the number of weeks that the employee has been employed by the business (i.e. since they started working in the company) by 2.923. This will give you the total hours of annual leave that the employee has accrued;
- deduct any annual leave that the employee has already taken; and
- multiply this amount by the employee’s hourly rate of pay.
The Fair Work Ombudsman offers an online calculator to calculate employees’ annual leave.
Key Takeaways
As an employer, abiding by the law and relevant national employment standards is crucial. You owe employees who have worked for your business for more than the prescribed period at law long service leave. In addition, you must provide full-time and part-time employees with annual leave. However, calculating employees’ leave entitlements can be tricky, despite the readily available mathematical formulas.
If you need help calculating your employees’ leave entitlements, our experienced employment lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
As an Australian employer, you may owe employees who have completed a lengthy period of service with you long service leave. For example, in NSW, employees who have completed at least ten years of service with you are entitled to two months (8.667 weeks) of paid long service leave. For every 5 years after the initial 10 years of service, NSW employees are also entitled to one month of long service leave.
Annual leave is paid time off for your full-time and part-time employees for rest and recreation, as required under the national employment standards. Annual leave accrues with every year of service, according to the employee’s ordinary hours. Your employment agreements cannot take away these leave entitlements.
Employment agreements can provide more leave than the legal minimum but cannot reduce the entitlements prescribed by law. Ensure that your agreements reflect this and offer the necessary benefits to your employees.
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