Comprehensive Guide to the Victorian Long Service Leave Act 2018

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To quickly locate the information you are looking for within the Guide, click on a heading in the table of contents and you will jump directly to the related content section.

Starting a business

Long service leave (LSL) is an important consideration for anyone looking to start a small business.

While you may not have any liability for LSL until your employees have reached 7 years' service, it's vital to plan for LSL from the beginning, and ensure that necessary records are kept.

Example – Ryan starts a small business

Ryan is looking to start a small business. He will be employing 3 casual staff initially.

He has found out about rates of pay, tax, superannuation and workers compensation insurance but he figures he will worry about LSL down the track and thinks it doesn't apply to casuals anyway.

Without planning ahead for LSL, Ryan is at risk of financial liabilities down the track.

Buying a business

If you're looking to purchase a business and will continue to employ the employees of that business, you're likely to be required to recognise their period of employment (for LSL purposes) from when they first started working at that business.

Even if the contract for the sale of business does not include contingencies to cover a transferring employee’s LSL, the employee still has an entitlement with you under the LSL Act 2018.

Where an employee will continue with your new business, the old owner generally should not pay out accrued LSL to the employee, as this may amount to an unlawful cashing out of the entitlement. There are sale-of-business situations in which it may be unknown to an employer whether an employee may become re-employed by a new owner of the business.

Whatever the seller and yourself agreed during your negotiation has no bearing on the continuing obligations to the employee under the LSL Act 2018, and any arrangement must ensure strict compliance with the LSL Act 2018.

Example – Consuela

Consuela has been continuously employed by Robert’s Tyres for nine years. The owner of Robert’s Tyres, Robert, sells the business to James. When the business is taken over, James continues to employ Consuela.

In this situation, Consuela’s employment is continuous. James becomes liable for Consuela’s accrued LSL over the past nine years, and for any LSL that accrues in future.

For further information see LSL Act 2018 Fact Sheet 5 - 'one employer' (DOCX 235.8 KB)DOCX icon

Buying assets

If you're looking to purchase the assets from a company – which includes a company that has been placed into administration or liquidation – you may be liable for the LSL of any employees who continue working in connection to those assets. Assets include both tangible and intangible assets.

Intangible assets may include good will, brand recognition and customer lists.

Example – Michael works as a graphic designer

The company Micheal works for has no physical office, and he works from home. The company becomes insolvent and is liquidated. The liquidated company’s online domain name, which has positive online brand recognition, is sold to another business. The new business employs Michael, and he commences work on the day following the transfer of the domain name.

The LSL Act 2018 defines assets to include intangible assets. In this example, the positive branding recognition associated with the online domain name satisfies this definition.

Michael will be entitled to have his prior period of employment recognised, and his employment will remain continuous for the purposes of LSL accrual under the LSL Act 2018.

Running a business

We understand there are many things to consider when running a small business. For businesses without a dedicated HR or payroll department obligations under the different pieces of legislation can be confusing.

Ultimately employers will be liable for any errors.

Example – Tracey isn't sure about her payroll system

Tracy runs a retail clothing store. Her friend Tony also runs a retail store.

Tony recently mentioned to Tracy that his payroll system had been incorrectly calculating LSL for his employees and now he has to find the money to rectify an incorrect LSL payment made to an employee who resigned six months ago.

Tracy isn't sure how to check whether her payroll system is calculating LSL correctly.

To ensure that you are calculating LSL correctly, email Wage Inspectorate Victoria at or call 1800 287 287.

Is your business compliant?

Contact Wage Inspectorate Victoria online or call 1800 287 287.

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