But what does it all mean and how will it affect your business? Well, lucky for you, we’ve got a quick summary of the key changes to ensure you are on top of this important update impacting Victorian businesses.
An employee will be able to apply for Long Service Leave (on a pro rata basis) after seven years of service, rather than after ten years. This is a major change as currently an employee may have Long Service Leave paid out if their employment ceases after seven years, but the right to take Long Service Leave currently only arises after 10 years of continuous service.
One Day at a Time
Currently, the Act states that Long Service Leave must be taken in one period or by agreement of the employer and employee, an employee may take the first 13 weeks of leave in two or three separate periods. The new Long Service Leave Act (2018), now allows employees to take long service leave one day at a time, provided that the employer and employee agree. This is aimed at providing employees with greater flexibility, particularly for those transitioning to retirement.
Changes to Working Hours
Under the current Long Service Leave Act, if an employee changes their work hours during the 12 months immediately before taking long service leave, their normal weekly hours of work for calculating that leave are averaged over the previous 12 months or five years, whichever average number is the greater. However, the new Act allows for an additional third option in which the hours worked are averaged over the full period of continuous employment, and the employee will be entitled to the greater of the three averages.
Within 12 Weeks of Termination
If an employee is re-employed within 12 weeks of termination due to dismissal or resignation, expiry of a specified term contract or completion of their apprenticeship, their employment is taken to be continuous. Under the current Act, this only applies if the employee is dismissed.
Civil to Criminal
Penalties for a business for failure to pay Long Service Leave are increased from a maximum of $3171.40 to $9514.20 under the new 2018 Act. Criminal rather than civil penalties will now apply for taking adverse action against an employee because they are entitled to Long Service Leave and for failing to disclose that an employment agreement would modify or remove an employee’s Long Service Leave entitlements. Authorised officers will have new powers to compel the production of documents from employers.
The above are the more notable changes so what does this mean to you as an employer or business owner? Now is the time to review and update any policies and procedures and your payroll functions that are relevant to Long Service Leave ensuring all entitlements are correctly calculated and administered when the Act will come into effect on 1 November 2018. There is no transitional period in allowing employees to access their long service leave at 7 years – it comes into effect immediately so you need to be ready to manage any requests.
If you are not prepared and you don’t pay out correct entitlements on cessation of employment, you will be liable for penalties and interest until the payment is rectified. As with any business transactions, ensure you keep all relevant records to ensure entitlements are calculated correctly and you can defend any claims.
Here to Help
If you need assistance in reviewing and updating your policies and procedures around the changes to the Long Services Leave Act 2018 (Vic), please contact via phone or email us as we are here to help!