The Victorian Government have announced that long service leave (“LSL”) is now fairer and more flexible for women, parents and carers through the Long Service Leave Act 2018 (Vic) which will come into effect by 1 November 2018. So what are the key changes to long service leave in Victoria?

Entitlement to LSL

Employees were previously entitled to take LSL after 10 years of continuous service with one employer. This has now been reduced to 7 years, with employers still required to pay out an employee’s accrued LSL entitlement if employment ends after 7 years.

The LSL accrual rate of 1/60th of the period of continuous employment remains unchanged.

The manner in which LSL could be taken was quite prescriptive under the previous legislation and required LSL to be taken in one period, unless there was agreement between the employer and employee to take the first 13 weeks in 2 or 3 separate periods.

The new legislation allows for employees to request to take LSL for periods of 1 day or more, making it more in line with other leave entitlements.

These changes will result in more employees becoming eligible to take LSL, and allows for more flexibility when taking leave for both employees and employers.

In respect of accounting for LSL in the balance sheet, under the previous legislation there was an unconditional right to defer settlement of the LSL for employees with less than 7 years of service, so this would be recognised as a non-current liability, and LSL for employees with 7 or more years of service would be recognised as a current liability. This is still the case under the new legislation.

Continuity of employment

Previously when an employee took paid or unpaid adoption, maternity or paternity leave for more than 12 months, this would result in a break in employment and the period of service recommencing at the end of the absence.  Other absences from work, either paid or unpaid, did not have this 12-month restriction.

The new legislation allows for a period of unpaid leave of up to 52 weeks to be included in determining the length of continuous employment. Unpaid leave in excess of 52 weeks in one period will not count toward the length of continuous employment, however will not result in a break in employment.

The transitional provisions of LSL Act 2018 detail that these changes will take effect for any leave taken after the commencement of the Act.

The legislation for LSL in respect of business transfers has been clarified. Under both Acts, if an employer’s business assets transfer to a new employer, an employee who performs duties in connection with the assets is treated as being employed by ‘one employer’. The 2018 Act extends assets refers to both tangible and intangible assets, to cover situations where only intellectual property is transferred.

These changes, as highlighted by the Government, will make LSL fairer for parents as periods of parental leave are treated in the same manner as other leave, and will not result in a break in the period of continuous employment.

Calculation of leave

Under the previous legislation, for employees with no fixed hours or a change to average hours in the past 12 months, the normal weekly hours for LSL purposes was the greatest of the average weekly hours in the past 12 months or average over the past 5 years.

Under the new legislation, for employees with no fixed hours or if hours have changed one or more times in the past 2 years, the normal weekly hours is taken to be the greatest of the average weekly hours in past 12 months, 5 years or period of continuous employment.

This change in the calculation of weekly hours for LSL purposes will be fairer to parents that may change between part-time and full-time hours during their employment.

The Long Service Leave Act 2018 (Vic) may be fairer and more flexible for women, parents and carers. If you have any queries on LSL requirements, please contact your trusted adviser.

This article was co-authored by Leonze Downs, HLB Mann Judd Melbourne