Portable Long Service Leave – what employers in the community service, contract cleaning and security industries need to know

In September 2018, the Long Service Benefits Portability Bill 2018 (‘the Bill’) was passed by Victorian Parliament, with the provisions of the Bill to come into effect in mid-2019. The Bill introduced significant changes to the way that long service leave operates in the community service, contract cleaning and security industries, and all employers in these industries need to be aware of what this mean for them.

Until this Bill, employees in these industries accrued long service leave in the same way that the majority of other employees accrue long service leave – ie, for their years of service their employer. If they changed employer through this period, the length of service and accrued long service leave would be lost, and each time they started a new job, they would begin to accrue long service leave again. Ie, the long service leave entitlement isn’t carried from employer to employer.

The new Bill changes all this. Rather than accruing long service leave for service with an employer, employees in these industries will accrue long service leave for service in the industry – ‘portable long service leave’. After seven years of service in their industry, affected employees will be able to take long service leave – regardless of whether they have worked for one, two, or many more employees during this period.

While this is a significant change for employers and employees in the community service, contract cleaning and security industries, the concept of portable long service is not entirely new. The construction industry has long had a portable long service leave system, which in Victoria is managed by the CoINVEST fund.

To affect these changes, a new statutory authority will be established to manage portable long service leave, and the Long Service Leave Act 1992 (Vic) will be repealed and replaced by the Long Service Leave Act 2018 (Vic). This legislative change is expected to occur on 1 November 2018.

What does this mean for employers?
First, employers need to understand whether this new legislation is going to affect their business. Not all industries and businesses are affected, but those that are need to take note. This is not something that you can ignore – it will mean new obligations, and understanding what you need to do, and when.

If you are an employer in the community services sector, security industry or the contract cleaning industry, you will need to:

  • register your business as an employer
  • register your eligible employees
  • keep particular records, and crucially
  • make quarterly payments of the ‘levy’ into a new fund (similar to the way you pay superannuation). Note that the amount of levy has not yet been set, but could be up to 3% of employees’ salaries.

Once an employee has accrued seven years’ service, they will be able to apply to the new statutory authority, which will make long service leave payments to that employee. While employers are required to make ‘levy’ payments for each worker in accordance with the amount they work, employers are not required to make long service leave payments when employees take their leave.

What about contractors?
As is always the case, employers should be very careful about how they engage their workers. If a worker is engaged as an ‘independent contractor’ but ought really be engaged as an employee, they will be covered by this new scheme.

Workers operating as genuine independent contractors can make contributions to the scheme, but are not required to.

These changes stand as a significant development in employment law across Victoria. It is essential that all employers are aware of these proposed changes and implement the required adjustments where necessary.

Employers will be required to make quarterly returns to the new authority, providing information on their employees, the amounts paid to each employee and their leave entitlements. Whilst the exact amount is at this point unclear, employers will also be required to pay a levy to fund the scheme. Significant penalties will be incurred should this levy not be paid.

It is important to watch this space for the finalisation of these changes to determine the full extent of the impacts for employers.

How we can help
Sinclair + May have extensive employment law experience, and we understand how difficult it can be to stay up to date with this constantly changing environment. We can assist you to update your employment contracts and procedures to ensure that they are up-to-date and compliant with the new legislation.

If you are unsure whether these changes affect you and your business, we can advise whether or not you are captured by the scheme and any potential obligations that may follow.

If you feel that this information is relevant to you, or if you wish to discuss any of the above information, please call 9111 5660 or email jessica@sinclairmay.com.au.

This is general advice only. Liability limited by a scheme approved under Professional Standards Legislation. 

Published Oct 23, 2018

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