Recording Long Service Leave

Sarah:

Hello, everyone. Welcome back to another episode of Westcourt Tech Vlog. Today we have Adam with us and we’re going to just talk about recording your long service leave. So, I think Adam’s been working here for a while, so it’s coming up.

Adam:

Yeah, actually is.

Sarah:

Please do tell us more about long service. What do you think, Adam?

Adam:

Thanks, Sarah. So I think I’m coming up June, about six months time, that hit seven years, so that’s one of your key sort of milestones for a long service basically. As soon as you hit seven years, you’re entitled to a payout if you leave any time between the seven and 10 year mark, and it’s going to be prorated, so you’re not going to get the full eight and 2/3 weeks, whatever it is. And you’re not going to get that paid out, but you’ll get pro rata of how long it is. And it’s going to depend on if you’re full-time the entire time, if you took unpaid leave, if you’re part-time and casual. So pro-rata off that. And then once you make that magic 10 years, hopefully your bosses will throw you a party as well for it. That’s when he can actually go and take your long service.

Sarah:

Yeah. So you were saying, it depends on what happened during the course of the 10 years. So say someone went on maternity for 12 months, then that would come off the full 10 years and then, so it’d be technically 11 years of … is that right?

Adam:

Yeah. So pro rata is off that. So unpaid leave isn’t classed as it. So when you do get it paid out, however it’s actual current pay rate. So even though it’s been accruing for the last 10 years or so, you might have started on 40 grand, but if by the time you take your leave, you’re on a hundred grand, well, you’d be getting paid that wage. So that’s another key thing to remember. It’s not what it was accruing at. It’s what you’re actually earning now.

Sarah:

Yep. And so why do you recon it’s important for businesses to record their long service leave in general, on the balance sheet?

Adam:

Yep. So just like with annual leave, it’s a really important, and basically it shows a true and proper position or your business because you legally have to pay that. So it’s not like it’s going magic away and you just ignore it. And because it is such a large amount of leave as well, it can actually hit you quite hard on the balance sheet. So what we recommend here is from the seven year mark, you started growing for it right then and there. Cause then you’ve basically got three years to build up a bit over eight weeks of leave liability for the employee. Otherwise eight weeks is a lot, that’s basically two months of work. Otherwise you hit 10 years and suddenly you might have to find, 10, 20 grand in a liability that you might have to pay out straight away if they want to take it straight away and you agree to it. So it can massively affect your business if you’ve got a lot of people coming up to that anniversary. It’s a good idea to basically just start accruing for it from year seven.

Sarah:

Yeah, for sure. And so I understand as well that if you are paying long service leave, that will also attract super payments. But if it is being paid out as a lump sum, let’s say as someone leaves, then that does not have payment, super payments added.

Adam:

Yeah. So it depends on what it is. So lump sums can sometimes not be classed as ordinary times earnings, which generally won’t attract, so ordinary times earnings, your normal hours attracts super overtime, not ordinary times earnings does not. Same here for lump sums. So that is not the key thing you need to worry about when you sort of accruing it. A really robust way to do it is when you do the long service calc, you accrue for the actual wage, you accrue the super on top of it. And if you’re on payroll tax territory, you need to start thinking about that as well to show the total oncost as well.

Sarah:

Cool. Well, there is definitely a lot to consider, but feel free to give us a call if you ever need some advice. We are available at eight to five, Monday to Friday. We’ll catch it in the next Vlog. See ya.

Adam:

Cheers.