Long service leave: A vital governance component

Saturday, 01 June 2024


    Yellow Canary explains why long service leave (LSL) should be a risk mitigation priority for every Australian business. 

    Presented by Yellow Canary

    LSL compliance is a daunting challenge for many businesses. Compliance relies upon interactions between state-based legislation, industrial instruments (enterprise agreements (EAs) and modern awards), the National Employment Standards, and sometimes internal policies, creating a complex system that leaves employers susceptible to compliance risk.

    State-based legislation

    Legislation governing LSL is distinct in each Australian state and territory. These laws have their roots in a historical tradition, established by calculating the duration it would take civil servants to return to England by ship after serving 10 years in their respective states.

    This tradition continues, contributing to the complexity of today’s industrial relations landscape. State legislation can differ in terms of duration of leave, the rate at which leave is paid, accrual calculation methods and final pay upon termination of employment, which can vary depending on the termination reason.

    LSL and enterprise agreements

    Different entitlements and rules throughout Australia and across industries create confusion, particularly for businesses operating in various states and territories or covered by multiple EAs. EAs can encompass various entitlements and accrual methods for LSL and entitlements can differ based on factors like employment status or qualifications. Many agreements feature hybrid structures, blending state-based legislation with negotiated LSL entitlements, evolving over time through negotiations between employees, their union and the employer.

    Payroll systems

    Compounding these issues is the fact that enterprise payroll systems are often supplied by global vendors and do not specifically cater for the intricacies of the Australian legal environment. Subsequently, manual workarounds (such as using spreadsheets for calculations) are frequently required, increasing the risk of human error, and impacting scalability.

    Act now to safeguard tomorrow

    The constant public scrutiny of underpayments has made reputation risk management a top priority for boards. Underpayment cases often reveal broader systemic issues with far-reaching financial implications, with LSL potentially the next focal point. The time for directors to interrogate their LSL compliance is now.

    Yellow Canary’s LSL compliance tool is the only automated solution on the market that can accurately calculate LSL balances and payments according to state legislation, modern awards and EAs.

    Ensure management can show visibility of your compliance state.

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