Taking it with you: should long service leave be portable?

The experience from similar schemes interstate has shown no evidence of significant adverse impacts to employers or employees in the  covered industries or to the economy generally.

The Victorian Government in Australia recently passed an act to make long service leave benefits portable for people in contract cleaning, security and community service. We ask three experts: should the entitlement be portable?

Ian Dixon

Partner, Employment Advisory Team, Gadens

Ian DixonLong service leave was initially granted to employees for 10 to 15 years of loyal service. The obvious benefits to the employer were the accumulation and retention of greater skills and experience.

With the establishment of portable long service leave for three industry groups, the reward becomes an extra entitlement for simply working, and creates a cost to relevant employers without the return of loyalty and retention.

The major issues created by its portability include the definition of the industries involved. The legislation attempts to set out the definitions, but this is problematic as some regulations allow inclusion or otherwise to be dependent on separate legislation. For example, any activity funded by the National Disability Insurance Scheme (NDIS) is considered “community service”. Health and aged care, however, are excluded.

Employers clearly within the industry definitions face onerous administrative reporting provisions every quarter. A further point of concern is that if a person leaves the industry for four years for any reason and doesn’t claim the entitlement, the contributions each employer made over time for that employee are not returned.

"If a person leaves the industry for four years for any reason and doesn't claim the entitlement, the contributions each employer made over time for that employee are not returned." Ian Dixon

The contribution levels initially fixed at less than 2 per cent are regarded as minimal by some. However, others fear that a governing authority may, if economic times do not improve, seek to lift the contribution rate or extend coverage beyond the margins of appropriate definition.

While some think portability is an appropriate benefit for workers, others will oppose the underlying philosophy. Based on the Victorian building and construction experience, the scheme’s administration will add considerably to that debate.

Joseph Yeung FCPA

CEO Victorian Portable Long Service Benefits Authority

Joseph Yeung FCPAPortable long service leave seeks to provide equity to workers who, through no fault of their own, are often unable to work with the same employer long enough to qualify for long service leave.

Portable long service leave is not new to Victoria. The first statutory scheme was established for the construction industry in 1976.

Victoria’s new Portable Long Service Benefits Scheme expanded long service leave entitlements to workers in the community services, contract cleaning and security industries – sectors that are typically characterised by high rates of contract and casual labour. This enables them to retain long service leave when moving between jobs within the same industry.

The experience from similar schemes interstate has shown no evidence of significant adverse impacts to employers or employees in the covered industries or to the economy generally. Further, research has found that portability can enable greater access to long service leave and improve staff recruitment and retention.

The most common argument against portable long service leave is the cost to employers.

"Research has found that portability can enable greater access to long service leave and improve staff recruitment and retention." Joseph Yeung FCPA

However, an efficiently administered scheme with prudent financial management of funds will be able to minimise the effects of this. The Portable Long Service Benefits Authority, which operates the scheme in Victoria, works proactively with all relevant stakeholders in the covered industries to ensure the smooth functioning and operations of the scheme.

Statutory portable long service leave schemes enable workers, regardless of the nature of their work, the ability to access this workplace entitlement in practice.

Dugald Murray

Executive Director of Policy, Trade and Public Affairs, Victorian Chamber of Commerce and Industry

Dugald MurrayVictoria’s portable long service scheme started in 2019, enabling workers in the community services, contract cleaning and security sectors to accumulate paid long service leave entitlements for long service within a sector, irrespective of how many employers they have worked for.

The scheme is funded by levy payments made by employers that are pooled into a central fund that pays long service entitlements to workers. Employers are required to register and pay a levy of between 1.65 per cent and 1.8 per cent of eligible wages.

Compliance is complex and challenging for employers in the community services sector, where it can be unclear which employers and employees are covered, and how it overlaps with existing long service leave entitlements. We recommend that employers seek expert advice.

The Victorian Chamber of Commerce and Industry opposed the introduction of Victoria’s scheme in 2018 on the basis that it would add red tape and increase the cost of employment, while not guaranteeing an increase in productivity.

Portable long service leave sits alongside a range of other Victorian workplace relations policies that, combined, risk turning Victoria into an expensive place to do business.

"Portable long service leave sits alongside a range of other Victorian workplace relations policies that, combined, risk turning Victoria into an expensive place to do business." Dugald Murray

These include new public holidays, changes to long service leave, labour hire licensing, new workplace manslaughter laws, owner-drivers’ reforms, proposed wage theft laws and an inquiry into the on-demand economy.

The Victorian scheme is part of a national trend, adding to similar policies in New South Wales, Queensland and the Australian Capital Territory. We will continue to monitor development and any possible expansion to other industries.

Meet the experts

Ian Dixon
Ian Dixon is a partner in the employment advisory team at law firm Gadens. An employment and industrial relations lawyer for more than 30 years, he has built a strong practice in all areas of industrial relations and labour law, both in the federal framework and the state jurisdictions.

Joseph Yeung FCPA
Joseph Yeung FCPA is the first CEO of Victoria’s new Portable Long Service Benefits Authority, which was established in 2019. Prior to this appointment, he was the CFO at the Victorian Department of Premier and Cabinet and is a former assistant secretary at the Commonwealth Attorney-General’s Department in Canberra. He is a fellow of CPA Australia, a Victorian legal practitioner and holds an executive MBA.

Dugald Murray
Dugald Murray is responsible for the Victorian Chamber of Commerce and Industry’s policy development, advocacy activities, government and media engagement and stakeholder relations. He is a former director at Nous Group, where he was responsible for providing strategic, economic, policy, management and organisational change analysis and advice. He holds a bachelor of economics from Monash University, and is also a non-executive director of the Australian Energy Foundation and Industry Capability Network (ICN) Victoria.

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