Casual employment is known for higher pay rates in exchange for no annual or sick leave entitlements. As such, employers and employees alike are often surprised to learn that long term casual employees are entitled to long service leave in a similar way to their permanently employed colleagues. The entitlement does, however, accrue at a slower rate, due to their reduced hours of work. The rate at which the leave accumulates is proportional to the number of hours that the employee works.
How to Calculate Entitlements
The formula for calculating the minimum amount payable to the employee for long service leave is set out in the Industrial Relations Act (Qld) as follows:-
Actual service (in hours) x 8.6667 x employee’s hourly rate
The relevant hourly rate is the employee’s loaded casual hourly rate on the day the leave starts, or the day the employee’s termination takes effect, as applicable.
The “actual service (in hours)” of the relevant employee is the actual number of hours worked by that employee over the period of their employment. And yes, this means that you should keep very good records of the hours your casual employees work. If you are an employer and haven’t been so good with the record keeping in the past, it is never too late to start! Fortunately, the development of technology makes this easier as time goes on.
When to Take/Pay Long Service Leave
As with permanent employees, once an employee has served at least 7 years continuous service, they are entitled to a proportionate payment for long service leave on termination of their service. However, if the employee’s service is terminated before they have completed 10 years continuous service, they are only entitled to that proportionate payment in certain circumstances, such as where the employment is terminated due to death, illness, domestic or other pressing necessity or the employer dismisses the employee for a reason other than their conduct, capacity or performance, among other things.
Otherwise, current casual employees are entitled to their long service leave after 10 years’ continuous service.
The entitlement of casual employees to long service leave was brought in during the early 1990s. Prior to 23 June 1990, casual employees were only entitled to long service leave in certain exceptional circumstances. After that date, the employee had to be regularly employed by the same employer for at least 32 hours in total for each consecutive period for four (4) weeks to accrue an entitlement to long service leave. From 30 March 1994, all continuous service is taken into account when calculating long service leave entitlements.
The period of “continuous service” for the purposes of calculating long service leave will not be broken by any of the following circumstances:-
- The employee being absent from work on leave granted by the employer, whether paid or unpaid, regardless of duration.
- Termination of employment due to illness or injury, provided that the employee is re-employed by the same employer and did not engage in other work during their absence from work.
- Termination of employment provided the employee is re-employed by the same employer within three (3) months.
- The employee’s service being interrupted or terminated due to industrial disputes or a slackness in business, provided the same employer re-employs the employee.
What if I sell my business?
The issue of entitlements to long service leave for casual employees is very relevant in the context of business sales and purchases. A new business owner taking on long-term casual employees may find that they also accrue a liability to pay those employees long service leave. The standard REIQ Business Sale Contract provides for long service leave entitlements to be adjusted in the buyer’s favour for employees who have served for five (5) or more years with the seller or a predecessor of the seller.
As with any contract provision, the standard terms of the Contract may not reflect the intention of the parties with respect to this issue and as such, it is important for business buyers and sellers to consider this issue and if it applies to you, seek legal advice to ensure the terms of your contract are tailored to your situation. Furthermore, it is important to ensure that when you are calculating the adjustments for long service leave at settlement, you at least consider your casual employees who are also accruing an entitlement to long service leave which may be adjustable under the terms of the Contract.