Long Service Leave

[AnnaB]

Hi there,
Is anyone able to tell me if there are any penalties for not paying a Long Service Leave Pro-Rata payout on the last day of employment? We had an employee who resigned after almost 20 years, so it is a huge payout. She didn't really give us a firm finishing date, as she came in a few times to finish off and handover work. There was some back-and-forth about the final payout figure, and then she asked if we could defer most of the payment until next financial year. We said we needed to get advice from our accountant first, which we did - we were told we should not defer the payment as it would leave us open to prosecution for aiding tax evasion. When we told her this and went to pay her the full amount in a lump sum, she said that because we hadn't paid her on her last day, she was entitled to be paid more. Is this true?
Would appreciate your help!
Anna

[Moz]

This sounds like sour grapes because you didn't assist her with some tax avoidance.

I believe you are required to make the LSL payment on the last day, but I would be very surprised if there was anything in the legislation that says someone is entitled to a higher payment if this was not made on time, particularly given that she had requested that the payment be delayed!

If she had not requested the payment be delayed and you didn't pay her out on time then the FWC may take some action against you and maybe award her some compensation (e.g interest), and probably fine you, but I doubt there is anything in the Act that says there is some automatic entitlement to additional payment.

However in past experience the Fair Work Act has not always proven to be logical or fair

I think you have done the right thing and hopefully you have her request for the payment to be delayed in writing or email.

I would just pay her out the original figure and see what happens.

[AnnaB]

Thanks so much for that. I did search long and hard on the internet and couldn't find anywhere saying I would have to pay her more, but thought I should check! Appreciate your help.

[Moz]

Anna,
My answer is not definitive, however I don't see that you have anything to lose by just paying her the original amount and then the ball is in her court.

See if she wants to go and complain to the FWC that her payment was delayed, because she was trying to avoid paying tax!

[Tiger]

Oh what a load of crap! But to start: after 20 years with you, she should already have taken two lots (min) of LSL (at 10 and 15 yrs). Sounds like you didn't manage that one and so she didn't take it? If this is the case, then yes, she was entitled to her full LSL entitlement at her resignation date, and to that end, she should have provided you with a Resignation Letter with a clear end date. All entitlements should have been paid out at that time. And your advice about deferring the payment was correct. Once an employee has resigned, you need to terminate, if you don't they may well end up still accruing entitlements because they are still on your payroll!!
That is not to say that a reasonable employer with someone retiring/resigning in say a late May or June might elect to pay the individual on July 1st - I have seen that done but any longer time between exit and payment, you may well be getting into hot water.
So as to her claim she should be paid more, I suggest you simply remind her there was some confusion about her actual resignation date which made it problematic to finalise her termination payments, that the entitlement is what it is and that's an end to it.
Tiger

[AnnaB]

Thanks for your input. We ended up just paying her the original figure. She sent us an email saying thank you with a happy face, so I assume it is all good!

Yes we didn't manage LSL well - small company, always tried to be flexible and look after her, and never thought she'd leave! A case of our generosity coming back to bite us... but we have learned our lesson!

[bullswool]

after 20 years with you, she should already have taken two lots (min) of LSL (at 10 and 15 yrs). Sounds like you didn't manage that one and so she didn't take it?

Just quickly Tiger, is the case for all states, do you know? Employer can/must direct employee to take LSL?

Once an employee has resigned, you need to terminate, if you don't they may well end up still accruing entitlements because they are still on your payroll!!

AnnaB, I know this has already been dealt with and my reply is a little late.
But as Tiger mentioned if the term date is changed then she would still be accruing leave entitlements. Maybe this is what your employee was referring too when she expected to be paid more i.e. the extra amount of accrued leave.