A look at long-service leave in Australia

Lisa Danker has just a few months to go to reach her milestone. Once October hits, she’ll have been at her company — UrbanGrowth NSW in Sydney, Australia — for 10 years. And that makes her eligible for long-service leave. It provides three months of paid leave, or six months at half of her pay, that she can take as a long holiday, use to top up parental leave or divvy up as she sees fit.

“To be honest, when I first joined, I was in the first five years of my career and [the leave] was not a decision factor,” says Danker, who works as a development manager. “But now that I’ve been there for a while, I’m like, ‘Oh no, I need to stay on so I can at least get the benefit.’”

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Long-service leave is a distinctly Australian and New Zealand benefit that originated in the 19th century. After 10 years of service, government employees would get between six and 12 months of paid leave to travel home to Britain, since the sea voyage could take months.

Staying power

“Everybody has to be granted entitlement to long-service leave under the national employment standards,” says David McNeice, a senior consultant at Willis Towers Watson in Melbourne, Australia. Yet while the benefit seems great on paper — especially to vacation-starved North Americans — he points out many employees don’t work for the same company long enough to earn the time off. Instead, if they stay with one employer for at least seven years, many workers will receive a lump-sum payment when they switch jobs. But McNeice notes such payouts, while good for employees’ pocketbooks, don’t benefit employers at all.

“If [the leave] is used properly, it means the employee has time for rest and recuperation after long service, which would help in maintaining ongoing productivity,” he says.

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Cash payouts, in lieu of extended time off, mean employees don’t get a mid-career break to recharge, and neither the former employer nor the new workplace benefits from improved focus and productivity.

Carrying it with you

Creating more portable options for long-service leave could help address the issue, according to Ray Markey, a professor and director of the Centre for Workforce Futures at Macquarie University in Sydney. Similar to Australia’s superannuation scheme — and some of Canada’s multi-employer pension plans — a leave accumulation model would allow workers to retain seniority, even if they leave their initial employer. Currently, coal miners, construction workers and community workers can do that.

“When there’s discussion of this at a general level, employer bodies usually say, ‘No, it’s not necessary; it’s irrelevant,’” says Markey. “However, there have been a number of reviews within the industries of the existing schemes and, overwhelmingly, the employers in those schemes are very favourable. They see advantages to them in being able to maintain skills bases within those industries so they don’t lose them to other industries altogether. And that was the original idea with mining: to keep skilled miners within the industry.”

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He also notes portable schemes help employers budget. Instead of being liable for three months’ salary when an employee becomes eligible for leave, all employers in the mining industry, for example, pay a small levy into a special fund for each person. When an employee reaches 10 years of service, the fund pays for the time off.

Employers that would definitely be worse off under a portable scheme are certain retail and hospitality organizations that, according to Markey, “don’t care about keeping the casualized staff long term anyway . . . because they literally don’t have anyone who they’d have to pay long-service leave to under the current system.”

Sara Tatelman is an associate editor at Benefits Canada.

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