LSL and other entitlements of employees

I apologise for out of chronology order of this topic, I had moved the current discussion before I realised there were similar discussions previously. I don’t think this will add to much distress to users in adding new information to the topic, if it does please accept that my error was not done with malice.

Continuing the discussion from Unpaid superannuation - ATO not doing enough or quickly enough:

" Hmmm. I think it depends on your perspective. :wink: Some things are more complex now that we have superstream.

The bottom line though with superstream is that it should mean that there is an independent party monitoring for when a company misses its first super payment (as well as monitoring by government). That doesn’t exclude completely the possibility that employees are out of pocket but it minimises the losses to one payment period - and that’s a good thing.

One additional observation on superstream: for some small and medium-sized employers, there is a cost per transaction in using superstream. Hence, forcing the company to make super payments in lockstep with salary has a real and measurable cost.

To elaborate on that, if an employer is using the government-run Small Business Superannuation Clearing House (SBSCH) then I believe there is no transaction cost but then of course there is only one set of eyes (the government) rather than two. There are eligibility requirements that an employer has to meet in order to use the SBSCH.

A large employer, who won’t be eligible to use the SBSCH, will choose a plan with the superstream provider that is more suited to a company with a mass of employees and a mass of transactions i.e. not a plan that hits the employer per transaction (but more likely a fixed large charge per period).

That has a real cost though. Imagine that I just became an employee of company X. If I stay 10(?) or 15(?) years then I will be entitled to long service leave. So are they required to put money away incrementally, and lose the use of the money for a decade or more, on the off chance that I don’t move on before reaching that entitlement?

Same issue with termination payments. It would tie up an unreasonable amount of cash (in my opinion) if a company had to make financial provision for making its entire workforce redundant at any time.

The situation with annual leave is not as dire but I know some employees who never quite take their annual leave (always something important going on) so that they could be several years behind.

So there is room for argument about what is an actual entitlement (you’ve done the work, you are entitled to be paid, and super on top of that) and what are accruing entitlements, some very theoretical.

The starting point would simply be to legislate to require an employer to show in its accounts its provisions for employee entitlements and have that audited as reasonably and correctly calculated. Since every company is required to form a reasonable belief that it will be able to meet its financial obligations as and when they become due, a company that is in real strife will be detected sooner."

Redundant or simply being able to pay for the accrued leave, super etc?

While redundancy was not mentioned explicitly annual leave, long service leave and super are not redundancy. They are genuine entitlements. Should an employer be entitled to spend that cash if not taken or given?

There is no entitlement to use what is not yours!

It’s akin to your bank not holding your savings such that when called on they cannot pay. There is no test of reasonable for using someone’s money without their permission. It amounts to simple theft, or fraud if one chooses. They are not my words, but those of the representatives of the employees caught out by those not so astute in business. Whether those in business are poor judges of their own finances or deliberate in deceit is for others to decide. It’s not opinion that matters.

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Indeed those provisions/reserves form part of the accounts and are currently audited. They are liabilities on the books just as are rent/lease payments for the premises, loans owed by the business, cost of communications, and so on.

Public Service example

Treasury Circular (nsw.gov.au)

The standard

AAS30_3-94.PDF (aasb.gov.au)

It is legislated and a requirement but some do not adhere to the requirements.

Yes, and if the employee does move on before any entitlement is available then the business gets the benefit of that and the employee loses that entitlement. It is a law that they make provision for an employee, as it is a lawful right of the employee to receive the payments that they worked for. Just because the accrual takes years to reach entitlement rather than days does not alter that it is an earned entitlement. Hmmm maybe then the employer shouldn’t make allowance for an employee’s weekly, fortnightly, monthly pay as they aren’t an entitlement in payment for work performed if your argument was followed. An absurd outcome I would think in anyone’s opinion except maybe those stealing the worker’s entitlement.

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Specifically: redundant. It was talking about “termination payments” which were explicitly raised (validly) by you as one of the many types of payment that could be within the scope of this discussion.

Perhaps by “termination payment” you meant payout of accrued annual leave (and available long service leave if any) on departure (whether by reason of redundancy or resignation or perhaps other circumstances) - in which case I misunderstood what you wrote.

A fun question might be … what happens if the departure is due to misdemeanour? (in the general sense of the word) (Senior executives often face the provision of losing some of their entitlements if terminated for misdemeanour.)

In summary of my opinion:

  • super - not controversial but we should be realistic that it has a cost
  • annual leave - maybe
  • long service leave - problematic
  • redundancy - problematic

Long service leave also raises the question of whether the company has to put money aside year by year as you work towards being eligible or the company need not do that but instead must suddenly put aside provision for the full period of long service leave only once you become eligible.

Except that the business lost the benefit of that for a decade or more - so the net benefit may be negative.

The point of contention is not whether the employer has an obligation to pay but whether the employer should have an obligation effectively to put the money in trust.

Which of these entitlements is enshrined in law? Long service leave? Redundancy?

I understand that an employer is contractually obliged to do whatever it said it would. So my question is: what things does it not have the choice about saying?

There are existing precedents.

Portable long service leave entitlements in the building and construction industry - state based
EG
QLD How portable long service works | QLeave
NSW https://www.longservice.nsw.gov.au/

And for the black coal mining industry the entitlements accrue nationally
Employee - Coal LSL

Two notable industries where the employers are noted for their strength of political character, and they have a working solution to one of the areas of concern.

Sometimes there are alternatives, given the fullness of time. A very special historical example.

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That’s interesting information but it muddies the waters somewhat because effectively that is saying that employers have no obligation at all to offer long service leave (in that industry in that state). Instead, it is administered entirely by the (state) government - and it is funded by a special tax (which is obviously not optional for the affected companies to pay).

Relating it back to the original topic, it is like forcing the company to put the money in trust, where the trust is administered by the (state) government - so the company loses access to the money immediately even though the employee will not get anything for 10 years.

However if there is a shortfall of funds then it is the Queensland taxpayer who is on the hook, not the company. (The amount of the tax does not relate directly to the expected accrued liability and not all of the tax collected even goes towards long service leave.)

In a way the whole scheme violates the spirit of long service leave since it does not reward loyalty. However it recognises that the structure of the specific industry may not be conducive to long term employment.

They had no entitlement to it before, it was a legal provision they have/had to make. Only because the employee leaves before they have an entitlement become full term, do they have the ability to access it. Thus it is a benefit.

If instead let us say the person stayed until the benefit became payable and the employer had not made provision for it, what impact might that have on their books. A good business practice is to set aside even if only a paper figure what the business knows will be a future cost they have to pay. Each year this provision is not onerous unless the business is not working well. Is that the employee’s fault that the management don’t manage?

So should they put it in a provision account in their ledger? Well good practice suggests they should, bad practice suggests they don’t. Further, they don’t put it in a trust account (they could but most don’t), it may be in savings on which they earn interest, it may be used by them in everyday business but the obligation remains on the books to show if the business is meeting it’s legal obligation to not be trading insolvent…that is the books show they are solvent enough to meet their debts.

Did you understand this to be that they must set aside that cash money? No, they don’t have to do that but they must prove they remain solvent enough to pay debts when they become due. If they are trading as an insolvent business they are certainly breaking the law.

In the building industry it has had a bad history of companies folding leaving workers without their due entitlements, the response has been to then require that type of workplace to meet sterner obligations in regards to worker entitlements to ensure the worker is not left without support and their rightful entitlements. I see no conflict at all.

I think we may have to agree to disagree on “entitlement”.

But was it? I asked but the example given that I looked at (QLeave) says it isn’t - because a special scheme has been set up that takes the whole question of long service leave outside the scope of the employer-employee relationship.

So looking at employees in general in Australia, is there any legal obligation on employers to offer long service leave?

Edit: Partly answering the question, in NSW there are general provisions under the Long Service Leave Act 1955. That legislation also attempts to ensure that there is no double-dipping e.g. for workers covered under something like what @mark_m linked above.

This legislation has even been amended recently to ensure that workers who are “not”, as a result of the COVID pandemic, continue to accrue towards long service. So that’s a pretty good wicket to be on. :wink:

Except this bit changed a few years ago. It has to go to a superstream provider, who hangs on to the money for a while, causes extra delay, and eventually forwards it to the employee’s fund - thereby making it more difficult for the employee to monitor whether the contribution actually made it to the fund. :wink: I assume that superstream providers also copy information to the government.

There are a range of parties who might raise a red flag if a payment is late, or just didn’t happen at all e.g.

  • the superstream provider
  • the government (if not the same party as the superstream provider)
  • the super fund

I know for a fact that red flags do get raised. It may be that they don’t always get raised.

Obviously only the government has any actual enforcement powers.

Indeed there are and have been.

There are also Awards and Agreements (Contracts in reality) which may (and most often do include these entitlements as part of the contract) specify these. Some of these rely on the NES conditions, others are more specific in their terms. If not under these Awards or Agreements then the Fair Work Act and NES steps in.

Fair Work Act 2009 (legislation.gov.au)

National Employment Standards - Fair Work Ombudsman

" What are the 11 minimum NES entitlements?

The 11 minimum entitlements of the NES are:

LSL entitlements in States and Territories particularly public service work is mostly by State/Territory covered legislation. The example of the State in Qld to legislate the requirement of a payment to them is because of failure of an industry to protect employees entitlements and another reason that for many the nature of the work ie it is generally only for short periods with any one employer but may extend in the industry as continuous work. A better outcome in that case than allowing employees to be rorted or because of the nature of employment to be employed full time in the industry but over short periods be employed by a number of employers in the industry and so lose entitlement. A fair system in my opinion to ensure a decent outcome.

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With the recent ruling by the Federal Court stating that casuals be entitled to annual leave and sick days, I would like to put forward an idea that I have had for many years regarding having a long service leave scheme.

As a casual employee or someone who changes jobs every few years, there is currently no chance they would ever get long service leave. If however there was a scheme that collected the long service leave from the employer similar to superannuation then every working person would eventually have accumulated a buffer of paid leave regardless of having changed jobs every few years.

Having a long service saving scheme would be to everyone’s benefit, not just the person. The money’s from the long service leave fund could be used to build infrastructure projects to benefit Australia. The obvious benifit is to provide a person with a chance for a paid holiday but also as a buffer of paid leave if they were to get sick but did not have any sick leave accumulated. Also, the paid leave could possibly be made available in times of hardship.

One negative is that it could cost around $20 a week (0.2%) if the employee was earning $50,000 a year. The money does not disappear though like insurance payments and is sitting in a fund for them in the future. I think the benefits of having an accumulating long service scheme is worth some thought.

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Some industries and organisations allow the transfer of long service leave from employer to employer. This is particularly the case for the construction industry and in some states, contract cleaners and community service workers. There are other examples such as moving within government departments or GOCs. One should check whether accrued long service leave is portable when changing employers, particularly if they are in the same industry or sector (e.g. public service).

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The ruling was not exactly that, it was Casual employees working full-time hours will be entitled to paid leave. They are differentiated from casuals who are employed irregular hours on demand.

While that is good news it appears from the linked article government may intervene in an appeal, or legislate against it using the reason the economy is too fragile.

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Casuals however do not accrue LSL as that is considered a Permanent Part Time or Full Time employee benefit. There is no provision in accounting practices for LSL accruals for Casual employees. It wouldn’t matter if they moved jobs or not. Some contract cleaner and even Contract Employees in Govt jobs can accrue LSL entitlements but this also depends on the type of Contract they are employed under eg SES (Senior Executive Service) staff are all generally Contracted but they do accrue LSL under their contracts. Part Year Contracted Employees eg some teachers or short term staff do accrue Holiday pay but do not accrue LSL entitlements as their contract is not generally an on-going contract and hence no provision is made for them.

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Which is the point of my post that maybe we should be looking to provide this benefit to some of our most vulnerable workers?

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Hi, sorry if I am wrong about the sick leave, but I was quoting from a news article posted on this Choice Community website.

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Hi, I was referring to people working in private industry such as the hospitality industry and not government jobs.

While you are mostly correct regarding the public service there is the rare exception. I worked with someone who came to work for the Victorian Public Service and he was informed that the Geelong council had no reciprocal agreement with Vic Govt and his years of service with the Geelong council did not count.

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I understood your argument in regards to providing LSL to casuals. If they work FT or near enough to then I agree. There are some who work truly casual hours with a few different employers, how do the employers make provision for that particularly if the employee is quite transient in their work life. Worthy of looking at but in some cases hard to action I would think. Even with FT employees they don’t generally become eligible to access that leave or a pro-rata payment of it until several years of employment have been undertaken, this adds further complexity to the provision for some casual and itinerant staff. It would perhaps need some Nationally Based scheme to hold all the LSL funds for each worker such that when they transfer, move, cease and return to work that the scheme maintains those funds until the worker reaches sufficient work life history to access the funds. This of course would be something like National Pension schemes such as found in European countries or our National Super scheme , where an employee regardless of their work movements accrues a lifetime benefit but each employer has to submit those monies to a scheme on the employee’s behalf.

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I believe that was exactly the point - we need something like that, especially with the increased casualisation of the workforce.

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Hi graholl, I am putting forward an idea for discussion and I do not have all the details and answers for you.

Maybe as an idea for collection the employer adds a fraction (0.2) of a percent to the already collected superannuation and this is then placed in a fund that is separate and available eventually for a holiday and not locked away until retirement.

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