When Is Long Service Leave Payable Upon Termination Of Employment?

By 29 November 2019Workplace

It can often be confusing for employers to determine when and if an employee has an entitlement to long service leave.

Despite robust argument by the State of Queensland, a recent decision of the Industrial Court of Queensland in Schipp & Anor v The Starr Entertainment Qld Limited [2019] ICQ 9 has confirmed that an employee whose employment was terminated by reason of medical incapacity a few weeks short of having served ten years of continuous service was not entitled to pro rata payment of long service leave.

This case demonstrates the uncertainty and confusion that can arise in determining an employee’s entitlement to long service leave.

To assist employers identify when long service leave may be payable a summary of the relevant status in Queensland is set out below:

General entitlement

Employees who have a long period of service in Queensland are usually entitled to long service leave. Even casual and part time employees may be entitled to long service leave if they meet the qualifying period for long service leave entitlement.

The Industrial Relations Act 2016 Qld (Industrial Relations Act) sets out the minimum long service leave entitlements in Queensland. These may be increased under an industrial instrument or contract of employment.

Section 95 of the Industrial Relations Act states that employees, other than seasonal employees*, are entitled to long service leave on full pay of 8.6667 weeks if the employee has completed 10 years continuous service. After 10 years of continuous service if the employee has completed at least a further 5 years continuous service, they are entitled to a proportionate payment of the 8.6667 weeks based on the proportion that the employees further period of continuous service bears to 10 years

Proportionate payment on termination

An employee is entitled to a proportionate payment of long service leave on the termination of the employee’s service before the employee has completed 10 years of continuous service if:

  • The employee terminates the service because of their illness or incapacity or a domestic or other pressing necessity; or
  • The termination is because the employer dismissed the employee for a reason other than the employee’s capacity, conduct or performance or unfairly dismissed the employee or the termination is because the passing of time and the employee had a reasonable expectation that their employment would continue until the employee had completed at least 10 years of continuous service and the employee was prepared to continue the employment with the employer.

Continuous service and continuity of service

The term continuous service generally means paid work time or leave.

A period of unpaid leave may not break the continuity of service but would generally not count as service. For example, an employee’s continuity of service is not generally broken:

  • during a period of unpaid parental leave;
  • during a period of approved leave granted by the employer (paid or unpaid); or
  • where the employee is terminated and then re-employed by the same employer within three months

Rate of payment

Long service leave is paid at the ordinary rate being paid to the employee at the time they take the leave. Leave loading is not payable on long service leave

Cashing out of long service leave

There is capacity under s 110 of the Industrial Relations Act for an employee to be paid out all, or part, of an entitlement to long service leave instead of taking the leave if:

  • The relevant industrial instrument provides for the employee to be paid for all or part of the entitlement; and
  • the employer and employee agree by a signed agreement that the payment may be made; and
  • the payment is made in accordance with the industrial instrument.

If the industrial instrument does not make provision for the cashing out of long service leave then payment can only be made if ordered by the Queensland Industrial Relations Commission upon application by the employee on compassionate grounds or on the grounds of financial hardship.

*The entitlement of seasonal employees is provided for in Subdivision 7, Chapter 2- Modern employment conditions in the Industrial Relations Act.

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