Long Service Leave (LSL) is one of eleven National Employment Standards (NES). These are the minimum entitlements that must be provided to employees working in Australia. The NES covers employees who belong to the national workplace relations system. This is true regardless of registered agreement, employment contract, or award.
So, is long service leave paid if you’re made redundant in Western Australia?
Yes, an employee who is made redundant is paid long service leave subject to certain employment conditions. Depending on their length of service, they may be entitled to pro-rata long service leave, even if they have not worked a full 10 years with their employer.
You probably have more questions regarding long service leave, particularly when employment is terminated and you’re owed a significant redundancy package. Without seeking out professional redundancy planning services, it can be difficult to find the answer to the questions you likely have.
As financial advisors specialising in redundancy cases, we get many questions from clients about what happens to long service leave on termination of employment.
We have compiled the answers to the most commonly asked questions about long service leave in WA, including portable long service leave and how an LSL payment is taxed.
Continue reading for everything you need to know about long service leave and redundancy.
Table of Contents
Can I Get A Long Service Leave Payout If Made Redundant in WA?
Yes, long service leave entitlements are paid to an employee upon redundancy.
There are two scenarios in which an employee is entitled to an LSL payout:
- If the employee has completed at least 7 years of continuous employment but less than 10, the employee is entitled to a pro-rata long service leave payment. As ‘pro rata’ means ‘proportional’, the amount is based on a proportion of 8⅔ weeks of leave per 10 years of continuous employment. This includes years, months, and days (except when terminated for serious misconduct).
- If the employee previously received long service leave, they are entitled to LSL based on a proportion of 8⅔ weeks per 10 years of continuous employment since they last became entitled to LSL. This type of entitlement is only calculated on completed years of employment.
How does Pro-Rata Long Service Leave Work?
When an individual’s employment ends before he can work the total number of years required to get the full Long Service Leave entitlement, the individual can, in some cases, get paid a part of their Long Service Leave. This is calculated on a ‘pro-rata’ (proportional) basis.
A terminated staff member is eligible for pro-rata long service leave if the employee has worked continuously for between seven and ten years, or between one and ten years since they last earned long service leave.
However, employees terminated for serious misconduct cannot access a pro-rata LSL payment.
Portable Long Service Leave & Redundancy
How Does Portable Long Service Leave Work?
Portable Long Service Leave is designed to provide the benefit of LSL to construction industry employees, where long stretches with a long employer is not practical. This scheme gives eligible employees leave after 10 years of industry service despite changing employers, and every 5 years after that.
Long service leave is granted to eligible employees to recognise a long continuous period of service to a single employer. However, there are certain industries where this is simply not practical at all.
The construction industry belongs to this category. The nature of construction work means it’s not your typical 9-to-5 job, and employment tends to be project-based. Therefore, under ordinary circumstances, few people in the industry will ever qualify for LSL.
As such, the Portable Long Service Leave scheme was created for people working in the construction industry. Employees who can receive portable LSL include those working on the construction, alteration, repair or maintenance of any building, structure or works. This includes commercial, domestic, industrial, new or existing structures, and also includes work on installation, maintenance and repairs to fixtures, plant and equipment.
Much like traditional long service leave, employees under this scheme who accumulate 10 years of service will get 8⅔ weeks of leave, with an additional 4⅓ weeks long service leave for every 5 years of service after that.
Portable Long Service Leave on Termination
Just as with standard long service leave in WA, portable long service leave can be paid out on redundancy. The full rate of 8⅔ weeks paid long service leave applies after 2200 service days, the equivalent of 10 years of service.
A pro-rata long service leave payout is also possible for eligible employees who’ve completed 7 years of service, or 1540 service days. However, claiming a pro-rata LSL payment on termination breaks the period of service, so it will take another 7 years of service in the industry to become eligible for any future entitlements.
By claiming a pro-rata payment on termination of employment, you will break your service for long service leave purposes. This means that you must work another 7 years in the construction industry before you once again qualify for any further benefit from the Scheme.
How Much Is Paid For Long Service Leave on Termination?
The dollar value of long service leave payment when made redundant will depend on the employee’s usual pay rate.
Any employee who has been able to complete an entire qualifying period of service (e.g. 10 years) is entitled to be paid their full Long Service Leave entitlement (e.g. 8⅔ weeks) upon termination. The entitlement stands regardless of the circumstances of the employee’s termination.
If the employee qualifies for pro-rata long service leave, they will be paid out the proportionate amount for their service period, at a rate of 8⅔ weeks per ten years. However, if the employee was terminated for serious misconduct before completing the 10 year period, the employee is not entitled to pro-rata LSL.
How Is Long Service Leave Payment Taxed When Made Redundant?
A long service leave payout on redundancy is paid as a lump sum, rather than part of the Employment Termination Package. This may be taxed at your marginal tax rate or concessionally taxed, depending on individual circumstances.
For both a genuine and non-genuine redundancy, a long service leave payout is not part of the ETP (Employment Termination Payment) or the redundancy payment. Instead, payment for accrued leave is recorded on your income statement as a lump sum. However, it may still be concessionally taxed (i.e. taxed below your marginal tax rate) depending on the circumstances of your redundancy and when the leave is accrued.
It can be challenging to figure out which tax rate applies, so speaking to a tax accountant or redundancy planner can be helpful.
What if I’m Underpaid Long Service Leave on Redundancy?
If the employer does not pay or refuses to pay an employee their entitled long service leave upon redundancy, the employer may face penalties or criminal conviction.
Employees can make a complaint about underpayments of Long Service Leave entitlements in WA to Private Sector Labour Relations of the Department of Mines, Industry Regulation and Safety. They will be able to investigate allegations of underpayments of LSL under the Long Service Leave Act 1958 (WA).
In Australia, you have certain rights when your position has been made redundant, like time off for job interviews during redundancy notice to line up future employment. Your long service leave being paid out is another key entitlement you have if you’ve been made redundant.
If you need advice on your entitlements, tax treatment and more, consider speaking to a redundancy planner for professional advice.
Do You Get Paid Leave Loading on Redundancy?
Annual leave loading is an extra amount of money given to employees who take annual leave to compensate for overtime. Yes, any employee who is dismissed due to redundancy is eligible for a paid leave loading. However, different tax rates apply for employees who are made redundant.
When Does An Employee Qualify For Long Service Leave in WA?
An employee in Western Australia is entitled to long service leave after 10 years of continuous employment working in the same business (8⅔ weeks’ paid leave), or for every 5 years of continuous employment working in the same business after the initial 10 years (4⅓ weeks’ paid leave).
Do You Get Pro-rata Long Service Leave After 7 Years in WA?
Yes, an employee in Western Australia who accumulates at least 7 years, but less than 10 years of continuous employment is entitled to pro-rata long service leave based on a proportion of 8⅔ weeks for 10 years of continuous employment. This includes years, months, and days.
What Is Considered As Service For The Calculation Of Long Service Leave in WA?
Long service leave is calculated based on the time an employee has worked with a business, including annual leave, public holidays, sick leave (up to 15 days per year) and defence force duties. The continuity of service is not affected even if the employing business has changed ownership.
Is It Possible For Employees To Cash Out Their Long Service Leave in WA?
Yes. Upon agreement, an employer and employee may agree to cash out the long service leave once the employee has completed all necessary service. The agreement must be put in writing, and the employee must be given an adequate benefit for the LSL they have cashed out.
Is It Possible For Employees To Request Long Service Leave In Advance in WA?
Yes. An employee can make a request and reach an agreement with the employer to take long service leave in advance. Any employee who enters into such an agreement is not entitled to additional LSL until they have accumulated back the amount they were given in advance.
Can An Employer Refuse An Employee’s Request To Take Long Service Leave in WA?
No. An employer cannot legally refuse a request for long service leave if it has been at least 12 months since the employee became entitled to it. Before this, employers and employees should negotiate to determine the most suitable time to take long service leave. An employer also can’t direct the employee to take LSL at a particular time.
This article is provided as general information only and does not consider your specific situation, objectives or needs. WealthVisory Private Clients makes no warranties about the ongoing completeness or accuracy of this information. It does not represent financial advice upon which any person may act. Implementation and suitability requires a detailed analysis of your specific circumstances.
Matthew has a wide ranging background in business, finance, taxation and accounting with over 25
years’ experience, firstly as an Accountant before becoming a Financial Planner. Matthew has been in
the Financial Planning Industry since March 1998 and has been the principal of his own financial
planning practice since 2003.
Matthew has studied a Bachelor of Commerce degree from Newcastle University majoring in Financial
Accounting and the Diploma of Financial Planning from Deakin University. Matthew is a Registered Tax
Agent and is a member of the National Tax & Accountants Association (NTAA).
Matthew has particular expertise in the areas of retirement planning, superannuation, investments and
insurance. His emphasis is on building a professional, integral and lasting relationship with clients with
the objective of assisting them to achieve their financial and lifestyle goals.