​Long service leave – can you take it on half-pay?

​Long service leave – can you take it on half-pay?

By Paul Munro on 13 June 2018 Can an employer and an employee agree to enter into an arrangement whereby long service leave can be taken on half pay?

This question was recently sent to our Ask an Expert service.

Q An employee who has just completed 10 years of service has requested long service leave. She is based in our Queensland office and plans to take an extended holiday overseas with her family. The employee has requested four months' leave and indicated she would be happy to take the total period of leave on half pay. This would mean taking just over 17 weeks of leave on half pay. While her immediate manager is agreeable to the request, our head office thinks the arrangement may contravene long service leave legislation.

The employee is covered under the Clerks – Private Sector Award 2010.

A  In this case, the arrangement is subject to the long service leave provisions under the Industrial Relations Act 1999 (Qld) (Pt 3). The Act (s46) requires that leave is paid at an employee’s ordinary rate of pay (in this case this means the full-time rate) for the period of the long service leave. It would appear that an arrangement for payment for the period of leave at half-pay is not permitted, but would require an employer to pay the first two months of leave at the employee’s full-time rate of pay.

In order to comply with the requirements of the legislation, an employer and an employee would need to consider other possibilities, such as a period of leave without pay in conjunction with the paid long service leave. The Act (s48) does, however, allow a part-time or casual employee to take long service leave at the full-time equivalent.
If the parties agree to a period of leave without pay, it should be explained to the employee that this would result in the employee not accruing entitlements during such leave, such as annual leave, personal/carer’s leave under the National Employment Standards, as well as the accrual of long service leave under the Qld legislation. This may affect the employee's decision to agree to the arrangement. 

Other states and territories

With the exception of Victoria, it would appear an agreement to pay extended long service leave at the equivalent half-pay would not be permitted under state or territory long service leave legislation.

The Long Service Leave Act 1992 (Vic) (s71A) provides that an employer and an employee may make an agreement that allows an employee to take an amount of long service leave twice as long as to which the employee is entitled, paid at half the employee’s ordinary pay.

An employer must grant a request from an employee if it is reasonable to do so having regard to the needs of the employee and the needs of the employer’s business.

What about annual leave on half-pay?

In the case of award/agreement-free employees, r2.03 of the Fair Work Regulation 2009 provides that an employer and an award/agreement-free employee may agree to the provision of “extra annual leave in exchange for foregoing an equivalent amount of pay”. Such an arrangement may also be agreed upon between an employer and an award/agreement-free employee in the case of personal/carer’s leave.

In the case of award-covered employees, the Fair Work Act 2009 and the applicable modern award need to be considered. The Act (s90(1)) states that if an employee takes a period of paid annual leave, an employer must pay the employee at the employee’s base rate of pay for the employee’s ordinary hours of work in that period. This means that the employee is paid at their ordinary weekly hours for the period of annual leave, which would prohibit an arrangement whereby the employee takes extra leave on half-pay. In addition, the applicable modern award or enterprise agreement should be considered.

While the Fair Work Act allows that terms relating to the taking of annual leave may be included in a modern award or an enterprise agreement (s93), the award or agreement must make specific provision to allow for such an arrangement.

Enterprise agreements

Taking an extended period of annual leave on half-pay would be a permissible term in a proposed enterprise agreement, which could be included in an enterprise agreement through the bargaining process. Reference should therefore be made to the applicable enterprise agreement to determine the legality of implementing such an arrangement.
The bottom line: With the exception of Victoria, state and territory legislation does not permit the taking of an extended period of long service leave on the equivalent amount of half-pay.

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