Understanding Long Service Leave for Small Business Owners

Long service leave might seem like a benefit reserved for employees in larger corporations or government roles, but it applies to small business employees as well. Here’s a breakdown of how long service leave works in Western Australia and how it can affect your small business.

What is Long Service Leave?

Long service leave is an entitlement for employees who have worked with the same employer for a long time. The specifics of when and how this leave applies depend on the duration of the employee’s continuous service with the business. Under the WA Long Service Leave Act of 1958, employees—including full-time, part-time, and casual workers—are eligible for long service leave under the following conditions:

• After 7 years of continuous employment, employees are entitled to long service leave if they leave the company due to resignation, dismissal, redundancy, or death.
• After 10 years of continuous service, employees are entitled to 8.667 weeks of leave. Following this period, they earn an additional 4.333 weeks for every five years of continued service.

In the case of a business change in ownership, the employee’s prior service with the previous owner counts towards their long service leave entitlement.

How Much Should You Pay for Long Service Leave?

When an employee takes long service leave or cashes it out at the end of their employment, they should be paid at their ordinary rate of pay. The WA Long Service Leave Calculator can be a useful tool to help you estimate the payment for long service leave.

Employees can choose to take long service leave in one continuous period or split it into separate timeframes. There are also flexible arrangements, such as taking twice the amount of leave for half pay or taking half the leave at double pay.

Who is Eligible for Long Service Leave?

Generally, most private sector employees are entitled to long service leave under the Long Service Leave Act in WA. However, there are a few exceptions, and it’s worth checking the specifics regarding which employees are covered.

Does the Act Apply to All Businesses in WA?

Most private sector employers and employees, whether they fall under state or national industrial relations systems, are covered by the WA Long Service Leave Act. However, businesses in the construction industry should be aware of different long service leave arrangements that apply to them.

Long Service Leave in the Construction Industry

For construction businesses, including those employing apprentices or workers under a visa, long service leave is managed through MyLeave, a government authority overseeing the scheme. Employers in the construction industry must register with MyLeave and contribute a levy every three months to fund long service leave payments.

Failing to comply with MyLeave requirements—such as not registering or paying the levy—can result in fines or penalties. Be sure to check with MyLeave for detailed information on your obligations.

Tips for Small Business Owners

• Understand Your Obligations: Whether you’ve started a new business or bought an existing one, it’s important to be aware of your responsibilities toward employees, including their long service leave entitlements.
• Manage Your Liabilities: Accurate financial management is key to keeping your business on track. Ensure you maintain up-to-date records and create a system for tracking leave liabilities, such as using balance sheets or leave liability reports.
• Plan for the Future: Long service leave can have a financial impact, so it’s important to plan ahead. Budget for long service leave entitlements over time and prepare to cover the employee’s responsibilities while they are on leave. Hiring a temporary employee or training an existing staff member to take on additional duties can help manage the workload during the leave period.