How Long Service Leave Works for Casual Workers in NSW

Long service leave rewards workers who stay with the same employer for a long time. In NSW it is a statutory entitlement under the Long Service Leave Act 1955 (NSW) (the Act), and it applies to casuals just as it applies to full-time and part-time staff. If you employ casuals in NSW, the question is not whether they can accrue long service leave. It is how you measure their continuous service, when a payment becomes due, and how you calculate what you owe.

The Act has been in force since 1955 and its rules are specific. Three points cause most of the trouble for employers of casuals: deciding whether service has stayed continuous, working out whether a pro rata payment is owed when a casual leaves, and calculating ordinary pay for someone whose hours change from week to week. This article walks through how the scheme operates, where the traps sit, and when it is worth getting advice.

Who the scheme covers and who does what

The Act applies to every "worker", a term it defines broadly to include a person employed on salary or wages, piecework rates, commission, or as an outworker. For long service leave purposes, s 4(11)(a) of the Act is explicit: service means continuous service "whether on a permanent, casual, part-time or any other basis", under one or more contracts of employment. NSW Industrial Relations puts the same point plainly: full-time, part-time and casual workers, or any combination of these across the period of service, accrue leave under the Act.

The scheme has three moving parts:

• The worker: accrues the entitlement through continuous service, requests the leave, and takes it.
• The employer: keeps a long service leave record for each worker under s 8 of the Act, gives at least one month's notice before leave starts, pays ordinary pay during leave, and pays out accrued leave on termination.
• The enforcers: if a payment is not made, a worker can apply to the Local Court or the Industrial Relations Commission in Court Session to recover it, going back up to six years (s 12 of the Act).

What counts as continuous service for a casual

The whole scheme turns on "continuous service". A casual who works regularly for the same employer for years is accruing continuous service even though each shift is a separate engagement. The Act makes this clear by defining service as continuous "under one or more contracts of employment", so the fact that a casual is engaged and re-engaged for individual shifts does not break it.

What does not break continuity? s 4(11)(a1) of the Act lists the interruptions that leave service continuous:

• absence under the terms of the worker's employment
• absence on account of illness or injury
• an interruption caused by an industrial dispute
• slackness of trade
• absence by leave of the employer
• an employer-initiated break where the worker is re-employed within two months

Two details matter. First, continuity and counting are different things: for interruptions caused by slackness of trade, industrial disputes or employer-initiated breaks, the time off keeps service continuous but does not itself add to the 10-year clock. Second, the two-month re-employment window is the one that casuals trip over. If an employer ends a casual's engagement and the worker comes back within two months, service is deemed continuous. After two months, the earlier service is not automatically carried over.

The practical consequence is that many casuals quietly pass the 10-year mark. A casual who works most weeks for the same business for a decade, with the odd slow month and a few weeks off, will usually have continuous service for long service leave purposes. Employers who assume that a quiet period or a short break has "reset" the clock are the ones who end up with a surprise payout at termination.

The accrual milestones: 10 years, then every five

Once service passes 10 years, the entitlement crystallises. Under s 4(2)(a)(i) of the Act, a worker who completes 10 years of continuous service is entitled to two months of long service leave. The Act defines a month as four and one-third weeks, which is why the figure on NSW government material is 8.6667 weeks of paid leave.

For each further five years of service, the worker accrues another month. So:

• 10 years: 2 months (8.6667 weeks)
• 15 years: 3 months (13 weeks)
• 20 years: 4 months (17.3333 weeks)

Two further rules apply at the milestone end of the scheme. First, if a worker with between 10 and 15 years of service is terminated for any reason at all, a proportionate payment is due on the basis of 3 months for 15 years of service (s 4(2)(a)(ii) of the Act). Second, if a worker is terminated after 15 years, they are entitled to a proportionate amount for the years completed since their last entitlement, on the basis of 2 months for each 10 years (s 4(2)(a)(i)(C)). The point to absorb: once a casual has passed 10 years, an employer can no longer avoid a long service leave payment by ending the employment. Something is always payable.

The five-year pro rata payment

Before 10 years, the default position is no entitlement. The Act creates one exception: a worker who has completed at least five years of service is entitled to a proportionate payment on the basis of 2 months for 10 years if the employment ends in one of three circumstances (s 4(2)(a)(iii) of the Act):

• the employer terminates the employment for any reason other than the worker's serious and wilful misconduct
• the worker resigns on account of illness, incapacity, or domestic or other pressing necessity
• the worker dies

Notice what is not on the list. A casual who resigns for any other reason after five years, such as moving to another job, has no pro rata entitlement in NSW. There is no general entitlement on reaching retirement age either; that ground does not appear in the NSW Act, whatever you may read elsewhere. And an employer who terminates a five-year casual for serious and wilful misconduct does not owe a pro rata payment.

The calculation is straightforward. A pro rata payment on the basis of 2 months for 10 years accrues at the rate of 0.2 months per year of service. A casual terminated after 5 years and 6 months of continuous service is owed 5.5 divided by 10 times 2 months, which is 1.1 months, or about 4.77 weeks of ordinary pay. The harder question in practice is rarely the maths. It is whether the service was continuous and whether the reason for leaving falls inside the list, and that is where the record matters.

How a casual's long service leave is paid

Long service leave is paid on "ordinary pay", and for a casual this is where the calculation gets interesting. s 3(1) of the Act defines ordinary pay by reference to how the worker is remunerated. A worker paid wholly at a fixed ordinary time rate uses that rate. A worker paid otherwise, which describes most casuals, uses an average: the average weekly wage actually earned, excluding amounts for shift work, overtime and other penalty rates, over the weeks actually worked during either the 12 months or the 5 years ending on the day before the leave starts, whichever average is greater. Average weekly bonuses are added on the same look-back periods.

A worked example. A casual has completed 10 years of continuous service, so 8.6667 weeks of leave are due. Over the 12 months before the leave, the casual earned $52,000 across the weeks actually worked, an average of $1,000 per week. Over the 5 years before the leave the average was $850 per week. Because the Act takes the greater of the two averages, ordinary pay is $1,000 per week and the leave is paid at 8.6667 times $1,000, which is $8,666.70.

Two traps sit inside this definition. First, the look-back is measured over weeks actually worked, so a casual who took long unpaid stretches off will show a higher weekly average than their earnings across the whole calendar year might suggest. Second, working out what counts as "ordinary" can be genuinely hard for casuals. The Act excludes shift work, overtime and other penalty rates, and real questions can arise about how casual loadings, allowances and irregular bonuses should be treated under the terms of a particular employment. This is one of the few places in the scheme where it is worth having the calculation checked before you pay.

Taking the leave and what happens at the end

The mechanics of taking leave are set out in s 4(3) of the Act. The employer gives the leave as soon as is practicable having regard to the needs of the establishment, and must give the worker at least one month's notice of the start date (s 4(10)), unless the worker agrees to less. Leave is normally taken in one continuous period, but the employer and worker can agree to split it: into two periods if the entitlement is two months, into two or three if it is between two months and 19.5 weeks, and into up to four periods beyond that. By agreement, leave can also be taken in separate periods of not less than one day, and part of the entitlement can be taken in advance.

For a casual with no fixed weekly hours, s 4(3B) of the Act converts "one day" into hours using the average weekly hours actually worked over the 12 months or the 5 years before the leave, whichever is higher. The Act deliberately mirrors the ordinary-pay averaging so that leave taken in small slices matches the casual's real working pattern.

During the leave, the employer pays ordinary pay in full when the leave starts, or at the same time the worker's ordinary pay would otherwise fall due, or on any other agreed basis (s 4(7) of the Act). The Act does not allow payment in lieu of leave while the employment continues: s 4(8) prohibits cashing out except on termination.

Termination is where the scheme bites for most employers. Under s 4(5), a worker whose services are terminated is deemed to have entered on any untaken leave from the date of termination, and the employer must pay out the full ordinary pay for that leave forthwith. If the worker has died, the payment goes to their personal representative on request. The practical point: when a long-serving casual leaves, the long service leave payout is part of the termination payment, not an optional extra.

Breaks, transfers and business sales

Service can survive events that look like endings. The two most important for employers are business transfers and moves between related companies.

If a business is sold or otherwise transmitted, s 4(11)(c) of the Act deems the continuity of service not to have been broken by the transmission, and the worker's service with the old employer counts as service with the new one. In plain terms, the buyer inherits the long service leave liability, and a casual who has been with the business for eight years starts with the new owner with eight years on the clock. That liability should be priced into the sale, and the seller's long service leave records should be handed over; the regulations deal with transferring records to a successor. Similarly, where a worker moves between related corporations within two months of leaving one, continuity is preserved and service is aggregated (s 4(13) of the Act).

There is one NSW-specific carve-out worth knowing. Workers in the building and construction, contract cleaning and community services industries can be covered by portable long service leave schemes under their own Acts. In those cases the employer must not give or pay long service leave under the 1955 Act unless the registered worker applies for it (s 4(5A) and (5B) of the Act). If you employ casuals in those industries, check whether they are scheme members before you build your own long service leave process.

Where a lawyer earns their fee

Most of the scheme is mechanical, but the judgment calls are where disputes start. A lawyer earns their fee in four places:

• Continuity opinions: Whether a particular gap, re-engagement or leave period preserves continuous service is a question of fact against s 4(11)(a1) of the Act. If the answer is wrong, the entitlement is wrong by years.
• Ordinary-pay calculations: The averaging method, and what counts as ordinary rather than penalty, drives the dollar figure. Having it checked before a payout is cheaper than defending a recovery claim.
• Transfers and sales: Recognising service and allocating the liability between seller and buyer, or across related entities, needs to be dealt with in the documents, not discovered at settlement.
• Disputes: A worker can recover unpaid long service leave through the Local Court or the Industrial Relations Commission in Court Session, going back up to six years. If you receive a demand, early advice on the correct calculation and the strength of the continuity position changes how the dispute ends.

The record, not the roster, decides what you owe

For casual long service leave, the factor that decides what you owe is the service record: the start date, the gaps, the re-engagements and the earnings history. The arithmetic in the Act is fixed, but every dispute about casuals turns on whether service stayed continuous and how ordinary pay should be averaged. That is why the record-keeping obligation in s 8 of the Act, which requires a long service leave record for each worker kept for six years after they leave, is not paperwork for its own sake.

If you employ casuals who have been with you for years, the cheapest moment to sort this out is now: audit the service records of anyone approaching five or ten years, agree the averaging method before anyone leaves, and get advice on any gap or transfer that could change the continuity picture. A consultation to check the calculation is far less expensive than a recovery claim built on a five-year-old misunderstanding.