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  1. #1
    Join Date
    Mar 2012
    Location
    Hong Kong
    Posts
    34

    Default Long Service Leave - Need to pay prorate ?

    Hi,

    one of my staff in Sydney who worked for us for 8.5 years and he will relocated to our Canda office for a new role.
    he will under the local employment with our Canda office, but we will recongize his past service ,
    but he will not have any employment relationship with our Sydney office anymore after he move
    do he still entitled the long service leave in pro-rate?

    please advise, thank you very much.

    BR/Elaine

  2. #2
    Join Date
    Apr 2012
    Posts
    196

    Default

    Long Service leave is only applicable to work performed in Australia. Every Australian state and territory has its own LSL legislation which varies. In the main, LSL falls due and should be taken after 10 yrs of continuous service, then, in the main, is applicable after each subsequent five years of service.

    LSL may be a pro rata entitlement after or five or seven (depending on the state or territory the employee is working in) in the event of termination due to reduindancy, and, in some states/territories, there may be other reasons when pro rata is due at termination eg in Victoria it is payable even when the employee resigns.

    If you still want to recognize your employee's service in Canada, then you can continue to accrue it for him somehow (talk to your accountants since said employee will be off the Australian payroll). As your employee doesn't appear to be terminating, just relocating elsewhere, then, with 8.5, there is no entitlement as yet ie he can't take it until he has 10 yrs continuous service.

    In the scenario you describe, ie employee being seconded to Canada (presumably ultimately to return to your Australian operations at some point in the future, then generally employees are terminated from the Australian Payroll OR may be just suspended (ie reactivated again when they return to Australia). If the latter, the LSL will remain as it is at the time he moves/is suspended and begin accruing again when he returns.

    If it is a permanent relocation ie won't return to Australia, then you'd terminate and depending what state he has been employed in, pro rata LSL could be paid out at time of terminating employment in Australia.

    Not sure this helps but nothing straight forward about this on.

    Tiger

  3. #3

    Default Accrual Issues

    Quote Originally Posted by Tiger View Post
    Long Service leave is only applicable to work performed in Australia. Every Australian state and territory has its own LSL legislation which varies. In the main, LSL falls due and should be taken after 10 yrs of continuous service, then, in the main, is applicable after each subsequent five years of service.

    LSL may be a pro rata entitlement after or five or seven (depending on the state or territory the employee is working in) in the event of termination due to reduindancy, and, in some states/territories, there may be other reasons when pro rata is due at termination eg in Victoria it is payable even when the employee resigns.

    If you still want to recognize your employee's service in Canada, then you can continue to accrue it for him somehow (talk to your accountants since said employee will be off the Australian payroll). As your employee doesn't appear to be terminating, just relocating elsewhere, then, with 8.5, there is no entitlement as yet ie he can't take it until he has 10 yrs continuous service.

    In the scenario you describe, ie employee being seconded to Canada (presumably ultimately to return to your Australian operations at some point in the future, then generally employees are terminated from the Australian Payroll OR may be just suspended (ie reactivated again when they return to Australia). If the latter, the LSL will remain as it is at the time he moves/is suspended and begin accruing again when he returns.

    If it is a permanent relocation ie won't return to Australia, then you'd terminate and depending what state he has been employed in, pro rata LSL could be paid out at time of terminating employment in Australia.

    Not sure this helps but nothing straight forward about this on.

    Tiger
    "the LSL will remain as it is at the time he moves/is suspended and begin accruing again when he returns"

    I think it would be worth checking on this detail. I have been involved in cases where an employee moving to Australia with the same organisation has had their overseas service recognised for LSL purposes. So if there is a real possibility of this person returning to Australia, check on the accrual situation and if the overseas service is counted then check with Finance to see if they want to continue to accrue for the LSL. It is interesting seeing where the money comes from if there is no accrual. Regards Tasman

  4. #4
    Join Date
    May 2010
    Location
    Melbourne
    Posts
    151

    Default

    Think ultimately it comes down to the legal entity that is employing.

    We have expats that leave and go to other countries regularly, our expat policy is they continue to accrue all leave entitlements while on expat assignment. They are still employed by the Australian entity

    We have employees that go overseas with other entities from our global organisation. For our purposes they are terminated from employment with us and sign a new contract with the legal entity in the country they are going to. Their LSL is not continued and paid out if required at the time of departure.

    In answer to the question, I would not believe under NSW legislation there is a need to pay out the leave and would not continue to be accrued unless on an expat / secondment arrangement. Ethically however there should have been a discussion with the employee during the exploration phase of the new role and this should have been discussed, decided and documented. I have had similar situations here and we have made payments to employees in similar situations as a sign of good faith. There also would need to be a view to who initiated the move, if the employer asked the employee to go, then it could be seen as employer trying to get around their liabilities in some circumstances. If the employee applied for the role on their own will, then it would be less likely it needs to be paid out.

  5. #5
    Join Date
    Mar 2012
    Location
    Hong Kong
    Posts
    34

    Default

    Hi All,

    Thank you all of your advise on that, appreciated.

    my Staff will permanent relocated to Canada, and terminate the employment agreement with our Sydney office, therefore, I believed we need to pay the pro-rate entitlement when the time he departure.

    Once more question on the calculation the encashment of the pro-rate LSL, what is the base, will they should be paid out (pro-rate weighted) on the total compensation for the last 12 months (i.e base + bonus), or just use monthly Base to caculate, please advise, thanks.

    BR/Elaine

  6. #6
    Join Date
    Apr 2012
    Posts
    196

    Default

    If your employee is based in NSW, then pro rata payment at termination is applicable after five (5) continuous years of service and only in the event of redundancy, resignation due to domestic or pressing financial necessity or death. Given earlier exchanges, it may be that no pro rata LSL is payable in your example ie legally you don't have to pay it. Of course if working in another Australian state, the termination reasons do vary from state to state/territory.

    Payment for LSL is at the employee's ordinary rate of pay which includes bonuses/commissions which are averaged over the previous 12 months. However, bonuses are not factored into employees who earn more than $144,000 pa. Payment for LSL at termination is only computed on whole years worked, for service in excess of 15 years.
    Tiger

  7. #7
    Join Date
    Mar 2012
    Location
    Hong Kong
    Posts
    34

    Default

    I called to the Fair Work Ombudsman today, and the officer knew that we are in NSW, she said the payment is depends on who is the party to terminate the employment, as we are asking the employee to go , therefore, she said we need to pay him the pro-rate.

    Tiger, so based on your reply, it looks like the office in Fair Work Ombudsman is not correct, as you said "Legally" my case should not required to pay for the pro-rate as we are run the business in NSW ( Sydney ), right ?

  8. #8
    Join Date
    Apr 2012
    Posts
    196

    Default

    If Employee works in NSW and you are terminating that employee and it is not dismissal for wilful misconduct then likelihood it is because his/her job is no longer required ie position is redundant then yes if employee has at least five (5) years of continuous service, then you must pay out pro rata LSL.

    Tiger

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