The calculation is the total number of weeks of employment divided by 60 and multiplied by the ordinary weekly rate of pay for the employee’s normal weekly hours at the time the leave is taken or that employment ends.
Example
Lissa has worked continuously for 11 years; she wants some work-life balance and decides to resign from her employment. Lissa’s long service leave entitlement is calculated as follows:
11 years multiplied by 52 weeks = 572 weeks.
We then need to divide the total weeks by 60, as Lissa will receive
one week of long service leave for each 60 weeks of service. 572 weeks divided by 60 = 9.53 weeks.
At the time of resignation, Lissa’s ordinary pay is $1,100.00 per week gross.
9.53 weeks multiplied by $1,100.00 per week is $10,483.00 gross.
Lissa is therefore entitled to a payment of $10,483.00 (gross and subject to statutory taxation) on the day her employment ends.
How is ordinary pay calculated?
Ordinary pay is the actual pay received by an employee for working their normal weekly hours at the time the employee takes long service leave or ceases employment and has long service leave paid out.
Ordinary pay has a special meaning under the Act and depends on how an employee’s wages or salary are earned. It does not normally include allowances, penalty or occasional overtime rates that are paid on top of an employee’s ordinary time rate of pay, but is the actual ordinary time rate received. However, one of the key exceptions to this is that a casual employee’s ordinary rate includes the casual loading. Ordinary pay also includes the cash value of any board or lodging that the employee receives from the employer.
How is long service leave calculated if the employee’s hours vary from week to week?
An employee’s long service leave entitlement is based on his or her normal weekly hours at the time the leave is taken, or on the day employment ends. However, in some cases, an employee’s hours may vary from week to week. This occurs particularly for casual employees.
Where an employee’s hours vary from week to week, the employee’s normal hours for calculating their long service leave entitlement are taken to be the greatest of the average weekly hours (occurring immediately before the long service leave commences) over either the preceding 52 weeks, 260 weeks, or the entire period of continuous employment. When calculating the average weekly hours, unpaid leave is excluded. The Act contains helpful formulae to calculate ordinary pay in these circumstances.
The following process flowchart shows the steps to take when applying the averaging rules under the Act. You can use this flowchart to work out the average weekly number of hours and then ordinary pay for workers who do not have fixed hours of work. The formulae are set out in a table below the flowchart.
| Period of continuous employment | 52 weeks | 260 weeks | Entire period of continuous employment |
|---|---|---|---|
| Formula |
A= (B + C) ÷ (52 – D) | A= (B + C) ÷ (260 – D) | A= (B + C) ÷ (D – E) |
| Key to formula | A is the employee’s average weekly number of hours; B is the number of hours the employee worked during the 52 weeks; C is the number of hours in respect of which the employee took paid leave during the 52 weeks; D is the number of weeks the employee took unpaid leave during the 52 weeks; | A is the employee’s average weekly number of hours; B is the number of hours the employee worked during the 260 weeks; C is the number of hours in respect of which the employee took paid leave during the 260 weeks; D is the number of weeks the Employee took unpaid leave during the 260 weeks; | A is the employee’s average weekly number of hours; B is the number of hours the employee worked during the entire period of continuous employment; C is the number of hours in respect of which the employee took paid leave during the entire period of continuous employment; D is the number of weeks of the employee’s entire period of continuous employment; E is the number of weeks the employee took unpaid leave during the entire period of continuous employment. |
The average weekly hours is the greatest of these three calculations.
| 52 weeks | 260 weeks | Entire period of employment |
|---|---|---|
Step 1 Add the number of hours worked in the last 52 weeks to the number of hours of paid leave in the last 52 weeks | Step 1 Add the number of hours worked in the last 260 weeks to the number of hours of paid leave in the last 260 weeks | Step 1 Add the number of hours worked over the entire period of continuous employment, to the number of hours of paid leave in that time |
Step 2 Subtract the number of weeks of unpaid leave taken in the last 52 weeks (if any) from 52. | Step 2 Subtract the number of weeks of unpaid leave taken in the last 260 weeks (if any) from 260. | Step 2 Subtract the number of weeks of unpaid leave taken over the entire period of continuous employment (if any) from the number of weeks worked in that period. |
Step 3 Divide the answer you got at step 1 by the answer you got at step 2. | Step 3 Divide the answer you got at step 1 by the answer you got at step 2. | Step 3 Divide the answer you got at step 1 by the answer you got at step 2. |
Example
Dani has worked at a dance studio as a casual instructor for the past 10 years.
She works according to a roster but depending on lesson schedules, her hours
can change from one week to the next. Dani took 52 weeks of unpaid parental leave from February 2020 to February 2021. Dani has not taken any long service leave before but would like to do so now.
Dani’s hours over the past 10 years have been as follows:
| Year | Hours worked |
|---|---|
| 2012 | 600 |
| 2013 | 550 |
| 2014 | 620 |
| 2015 | 640 |
| 2016 | 638 |
| 2017 | 580 |
| 2018 | 655 |
| 2019 | 635 |
| 2020 | 100 |
| 2021 | 550 |
| 2022 | 635 |
| Total hours in the last 52 weeks | 635 |
| Total hours in the last 260 weeks | 2,575 |
| Total hours worked for the period of continuous employment | 6,203 |
| Total weeks worked for the period of continuous employment | 520 |
In the last 52 weeks
635 hours worked plus no hours of paid leave = 635 52 weeks minus no weeks of unpaid leave
635 divided by 52 = 12.2 normal weekly hours for the purposes of long service leave
In the last 260 weeks
2,575 hours worked plus no hours of paid leave = 2,575 260 minus 52 weeks unpaid parental leave = 208
2,575 divided by 208 = 12.4 normal weekly hours for the purposes of long service leave
For the entire period of continuous employment
6,203 hours worked plus no hours of paid leave = 6,203 520 weeks worked minus 52 weeks of unpaid leave = 468
6,203 divided by 468 = 13.3 normal weekly hours for the purposes of long service leave
Because Dani’s average weekly hours of work over the entire period of continuous employment is greater than the average weekly hours over either the last
52 or 260 weeks, her normal weekly hours for the purposes of long service leave will be 13.3 hours per week (because it is the greatest of the three averages).
How is long service leave calculated if the employee’s ordinary hours of employment have changed?
An employee’s long service leave entitlement is based on their normal weekly hours at the time the leave is taken, or at the time employment ends and the employee receives payment for any unused long service leave. However, in some cases, an employee’s ordinary hours of employment may change. For example, an employee may move from full-time to part-time employment, or vice versa.
Where an employee’s ordinary hours have changed in the 104 weeks immediately before the employee takes long service leave, the employee’s hours for calculating long service leave will be averaged over the preceding 52 weeks, 260 weeks, or the entire period of continuous employment, whichever average is greatest.
Example
Sonia has been continuously employed as a manager at a restaurant for eight years. For the first seven-and-a-half years she worked full-time (38 hours per week) but for the last 26 weeks she has worked part-time for 24 hours per week. Sonia takes 152 hours of annual leave every year.
Sonia’s hours for the last eight years have been as follows:
| Year | Hours worked |
|---|---|
| 2015 | 1,824 |
| 2016 | 1,824 |
| 2017 | 1,824 |
| 2018 | 1,824 |
| 2019 | 1,824 |
| 2020 | 1,824 |
| 2021 | 1,824 |
| 2022 | 1,460 |
| Total hours worked in the last 52 weeks | 1,460 |
| Total hours worked in the last 260 weeks | 8,756 |
| Total hours worked for the entire period of continuous employment | 14,228 |
| Total weeks worked for the entire period of continuous employment | 416 |
| Hours of paid leave in the last 260 weeks | 760 |
| Hours of paid leave for the entire period of continuous employment | 1,216 |
In the last 52 weeks
1,460 hours worked plus 152 hours of paid leave = 1,612 52 weeks minus no weeks of unpaid leave = 52 weeks
1,612 divided by 52 = 31 normal weekly (averaged) hours for the purposes of long service leave
In the last 260 weeks
8,756 hours worked plus 760 hours of paid leave = 9,516 260 minus no weeks’ unpaid leave = 260 weeks
9,516 divided by 260 = 36.6 normal weekly (averaged) hours for the purposes of long service leave
For the entire period of continuous employment
14,228 hours worked plus 1,216 hours of paid leave = 15,444 416 weeks worked minus no weeks of unpaid leave = 416
15,444 divided by 416 = 37.1 normal weekly (averaged) hours for the purposes of long service leave
Because Sonia’s average weekly hours of work over the entire period of continuous employment is greater than the average over either the last 52 or 260 weeks, her normal weekly hours for the purposes of long service leave will be 37.1 hours per week.
How is long service leave calculated if there is no ordinary time rate of pay?
An employee’s long service leave entitlement is based on their ordinary time rate of pay at the time the leave is taken or is to be paid out on termination. However, in some cases, an employee may not have a fixed ordinary time rate of pay. And in other cases, an employee’s wages or salary may include an hourly rate of pay and/or other regularly provided benefits which increase or vary the total salary over time. Examples which affect the calculation of ordinary pay under the Act include where the employee is paid per piece of work, per delivery, or on commission plus retainer or base rate.
Where an employee’s ordinary time rate of pay is not fixed for an employee’s work under the relevant employment agreement, the employee’s ordinary time rate of pay is the average of their weekly rate earned over the preceding 52 weeks, 260 weeks, or over the entire period of continuous employment (whichever is the greatest).
Non-discretionary commissions and regular bonuses (for example, those based on sales targets) that are included in the employee’s contract of employment may be counted as part of their rate of pay.
Example
Dragan is a real estate agent who has worked for the same agency for eight years. Dragan has resigned from his employment. He did not take any long service leave during his employment.
Dragan’s contract of employment specifies he is paid a retainer of $25,000 per annum, plus commission for sales he has written for the company. In the last five years, Dragan’s retainer did not alter but his commission varied.
Dragan’s earnings over the past eight years is as follows:
| Year | Commission $ | Retainer $ | Total p.a $ |
|---|---|---|---|
| 2015 | 25,000 | 50,000 | 75,000 |
| 2016 | 40,000 | 50,000 | 90,000 |
| 2017 | 30,000 | 50,000 | 80,000 |
| 2018 | 20,000 | 50,000 | 70,000 |
| 2019 | 45,000 | 50,000 | 95,000 |
| 2020 | 40,000 | 50,000 | 90,000 |
| 2021 | 35,000 | 50,000 | 85,000 |
| 2022 | 40,000 | 50,000 | 90,000 |
In the last 52 weeks
$90,000 earned divided by 52 weeks = $1,730.76
In the last 260 weeks
$430,000 earned divided by 260 weeks = $1,661.53
For the entire period of continuous employment
$675,000 earned divided by 416 weeks = $1,622.59
Because Dragan’s average weekly rate earned over the last 52 weeks is greater than the average over either the last 260 weeks, or the entire period of continuous employment, his ordinary time rate of pay for the purposes of long service leave will be $1,730.76 per week.
Does ordinary pay include the value of items such as mobile phones and cars?
Yes, if the value of the item forms part of the employee’s ordinary time rate of pay and is included in the contract of employment (oral or written).
Example
Shae works in sales for a company that sells stock feed. His contract of employment states that his total salary is $80,000.00 per year, packaged to include part cash payment, part the value of private use of an employer-provided mobile phone and part the value of private use of an employer-provided vehicle.
As the value of the vehicle and mobile phone form part of Shae’s salary and are included in his contract of employment, the value of the items would form part of his ordinary pay for long service leave purposes.
How is ordinary pay calculated when an employee is, or has been, on WorkCover?
If an employee is receiving WorkCover benefits or is working in suitable employment (i.e. as part of a return to work plan), the employee’s long service leave entitlement will be calculated on either their pre-injury normal weekly hours and ordinary time rate of pay, or their normal weekly hours and ordinary time rate of pay immediately before the employee starts long service leave, whichever is greater.
How do public holidays affect long service leave?
A public holiday falling within the period of leave is not counted as long service leave. This means that the public holiday hours will not be taken away from the employee's amount of accrued long service leave, in the same way as if the public holiday occurred during a period of paid annual leave.
This ensures that the employee will still enjoy the benefit of a public holiday should it fall during a period of long service leave.
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