If you have just purchased a business and employees from this business under the previous owner have decided to stay on with you, you might have obligations to provide these employees with certain leave entitlements. You should be aware of any such entitlements since they must be granted to employees under Australian law. Also, these employees may be very loyal to the business, which is why they have decided to stay on despite the change in ownership. To encourage their loyalty to the business it is a good idea to ensure that you grant them the benefits that they are entitled to.
Long Service Leave
Under the Long Service Leave Act, an employee who has completed at least 10 years of service is entitled to 2 months (8.67 weeks) paid long service leave. This entitlement applies to most full-time, part-time or casual employees in NSW. The rate that must be paid for this leave period should be the weekly wage that the employees earn on an ordinary basis. For every 5 years after the initial 10 years of service NSW employees are also entitled to 1 month of long service leave.
This means that when calculating the long service leave entitlements of your employees, you need to calculate the entire duration of their employment up to and including the day that you purchased the business.
How Do You Calculate It?
First you must find out how many weeks allowance you must adjust. This is done by:
- calculating the years that they have been employed by the business exactly (including decimals). The duration of employment will be from the day that they began working with the business up until and including the day that you officially purchased the business.
- you then multiply the number of years of employment by 8.667.
You can then find out the long service leave entitlement by:
- multiplying the weekly allowance by the years of completed service as at the date of purchase.
- deducting any period of long service that the employees may have already taken.
You then need to find out how much you will have to pay these employees during their long service leave. This is done by:
- multiplying the long service leave entitlement by the employee’s ordinary weekly pay.
To access an online calculator to calculate an employee’s long service leave, please see: http://www.apps.industrialrelations.nsw.gov.au/cyp/calcs/lsl/index.jsp
You will also have to provide your employees with annual leave. This type of leave accrues during a year of service according to the employee’s hours of services. For example, under Australian law, full time employees are entitled to 4 weeks worth of annual leave for every year of service. Part time employees will be entitled to a different amount of annual leave per year of service.
Employment agreements may change these leave entitlements but they can only grant employees more leave than is stipulated under legislation. Employment agreements cannot take away leave entitlements prescribed under law.
How Do You Calculate It?
To calculate annual leave, you can follow these steps:
- multiply the number of weeks that the employees have worked for the business by 2.923
- this will give you the total hours of annual leave that the employees have accrued
- deduct any annual leave that the employees have already taken
- multiply this amount by the employees’ hourly rate of pay
To calculate employees’ annual pay, you can use the online calculator here: http://paycheck.fwo.gov.au/leavecalculator.aspx
Calculating employees’ long service leave entitlements can be a little tricky despite the mathematical formulas readily available to you.