Long Service Leave Act 1955 (New South Wales) — Zoe

New South Wales act

Long Service Leave Act 1955

In ForceNSW

Jurisdiction

New South Wales

Act Number

38 of 1955

Collection

act

Plain English Summary

6/10 complexity

What this law does, in plain terms

Establishes a statutory right to long service leave for workers employed in New South Wales and sets out how much leave a worker is owed and when it must be paid (see s 4).

How the entitlement works, mechanically

Entitlement rules: A worker who has completed at least 10 years with the same employer is entitled to long service leave (s 4(2)). The basic accrual formula in the Act is: 2 months for 10 years, then 1 month for each subsequent 5 years; there are proportionate and special rules for terminations before or after certain service milestones (s 4(2)(a)(i)–(iii), (a2)).
Payment timing and form: When a worker takes leave the employer must pay ordinary pay either in full at the start, in pay-period instalments, or by other agreement (s 4(7)). If employment ends before leave is taken, the employer must pay the monetary value of accrued leave on termination (s 4(5)).
Ordinary pay calculation: The Act defines ordinary pay in detail and uses a “prescribed date” to fix the wage base; the calculation can use recent averages and excludes shift, overtime or penalty rates in certain circumstances (s 3(1)–(2C)). Employers and workers can agree to treat a different date as the prescribed date for particular leave (s 3(2B)).

Interactions with other schemes and portability

Where workers are covered by particular portable long service schemes (for building & construction, community services, contract cleaning), the Act requires employers to notify the Long Service Corporation before making payments (s 4A) and preserves coexistence rules so a worker who elects benefits under a portable scheme is not double-paid for the same period (s 4B).

JSON API

Deep Dive

4,228 words · generated 24/04/2026

What it does

The Long Service Leave Act 1955 (NSW) establishes a statutory minimum entitlement to paid long service leave for workers in New South Wales. At its heart, s 4(1) provides that every worker is entitled to long service leave on ordinary pay in respect of service with an employer, counting both pre- and post-commencement service. The quantum is set out in s 4(2)(a): after 10 years, a worker receives 2 months; each subsequent completed 5-year period attracts a further 1 month. On termination after 15 years, a proportionate amount is payable on the 2-months-per-10-years formula (s 4(2)(a)(i)(C)). For workers with 5–15 years whose employment ends for reasons other than serious and wilful misconduct, or who resign on account of illness, incapacity or pressing necessity, or who die, a pro-rata amount calculated on the 2-months-per-10-years (or 3-months-per-15-years for 10–15 year terminations) basis is available (s 4(2)(a)(ii)–(iii)).

The Act is prescriptive about when and how leave must be taken. Under s 4(3), once entitlement arises the employer must grant and the worker must take the leave “as soon as is practicable having regard to the needs of the employer’s establishment”, unless the parties agree to postpone it. Leave may be taken in one continuous period or, by agreement, in two, three or four separate periods depending on length (s 4(3)(b)). Since 2022, s 4(3AA) permits any number of separate periods of not less than one day. Advance taking of leave before entitlement is possible by agreement (s 4(3A)), although such advance leave does not itself trigger further accrual under the main formula.

“Ordinary pay” is defined at length in s 3(1). It is the sum of four components: (a) the greater of the worker’s ordinary time rate on the prescribed date or the 5-year average; (b) average weekly earnings (excluding shift, overtime and penalty rates) over the longer of the last 12 months or 5 years where the worker is not on a fixed ordinary time rate; (c) average weekly bonuses over the corresponding period; and (d) the cash value of board or lodging (fixed at $15/$5 per week or prescribed higher amounts if not otherwise set). The “prescribed date” is ordinarily the day before leave commences or death, but can be varied by agreement to postpone taking of leave (s 3(2B)). A regulatory cap now prevents inclusion of bonus or incentive amounts where ordinary pay already exceeds a prescribed threshold (s 3(2C)).

Current sections

Direct links to the current provisions in Long Service Leave Act 1955.

Official source available

Zoe has indexed the source text for search and analysis. Use the official register for the original document and download formats.

View on official register

Sourced from legislation.nsw.gov.au, CC BY 4.0.

The Act’s stated function is to guarantee long service leave and fix rules for entitlement, calculation, payment and enforcement (primarily s 4 and s 3). If that purpose is realised, workers receive a statutory, enforceable entitlement and employers face clear payment and recordkeeping obligations.
Costs and who pays: Financial cost of paid leave and any administrative costs fall on employers (payment and recordkeeping obligations) except where portable-scheme arrangements shift payment or administration to a scheme operator (see s 4A, s 4B).
Incentives and trade‑offs: The Act creates an incentive for employers either to (a) fund and administer leave directly, with associated administrative burden and cashflow costs (s 4(7), s 8), or (b) seek exemption and run an alternative approved scheme (s 5), which transfers some administrative cost but may require regulatory approval and is subject to review (s 5A). Employers may also face one‑off cash payments on termination (s 4(5)), producing potential short‑term liquidity pressures.
Compliance burden and risk: Employers must maintain records (s 8), respond to inspectors (s 9), and face civil penalties and possible officer liability for corporate non‑compliance (s 10, s 10A, s 10B). Calculating ordinary pay for varied employment types is operationally complex (s 3(1)–(2C)); that increases administrative cost and the risk of errors or disputes.
Bureaucratic discretion and review points: The Industrial Relations Commission has discretion to grant, review and revoke exemptions (s 5, s 5A). The Minister controls some disclosure permissions (s 9A(2)(b)). Those powers create decision nodes that affect employers’ options and workers’ coverage.
Effects on private choice and market behaviour: Employers cannot contract out of statutory entitlements (s 7), limiting contractual freedom on this point. Workers may, in specified portable schemes, elect to receive benefits under those schemes instead of this Act for particular periods (s 4B). The Act’s rules on continuity of service when businesses are transferred (s 4(11)(c)) encourage persistence of entitlements through ownership changes.
Concentrated benefits and diffuse costs: The immediate beneficiaries are workers who reach the qualifying periods; the costs are spread across employers in affected industries (s 4). Requests for exemptions (s 5) indicate employers may seek scheme-level solutions where administering individual entitlements is less efficient.

Who it affects

The Act’s primary beneficiaries are “workers” as defined in s 3(1). The definition is deliberately wide: it includes any person employed on salary, wages, piecework or as a member of a butty-gang, and expressly captures contractors for labour only, lessees of tools, outworkers, salesmen, canvassers, collectors, commercial travellers, insurance agents and commission-based workers. It excludes only metalliferous mining workers covered by the Long Service Leave (Metalliferous Mining Industry) Act 1963. Deemed employment relationships under the Industrial Relations Act 1996 are imported (s 3(4)), and certain bailment arrangements for vehicles or vessels are deemed to create an employment relationship where an award or agreement fixes a rate for the work (s 3(3)).

Employers are equally broadly defined: any person employing a worker, including the Crown (s 3(1)). The Act therefore binds public sector agencies, private companies, partnerships, sole traders and not-for-profits. Related-corporation rules in s 4(13) extend liability and continuity across holding companies, subsidiaries and sister entities, preventing artificial fragmentation of service.

Inspectors appointed under the Industrial Relations Act 1996, the Industrial Relations Commission, the Long Service Corporation (in relation to portable-scheme interactions), unions, and personal representatives of deceased workers all have enforcement or administrative roles. Directors and managers of corporate employers are personally exposed to criminal liability under ss 10A and 10B.

Workers in industries covered by portable long service leave schemes (building and construction, community services, contract cleaning) are affected in a hybrid way: they remain entitled to benefits under this Act but must apply for them, and their employers must notify the Corporation before paying (ss 4A, 4B, 5(5A)–(5B)).

The Act does not apply to workers covered by more favourable award, agreement or statutory schemes (s 5(1)), nor to those whose employers have obtained and not opted out of an Industrial Relations Commission exemption based on an equivalent private scheme (s 5(2)–(5A)). However, even exempted workers may elect back into the Act within three months (s 5(2)(c)).

Apprentices who become employees within 12 months, former military personnel whose service qualifies under s 4(11)(d), and employees whose service is interrupted by transmission of business or related-corporation transfers are all expressly protected. Casual, part-time and fixed-term workers are covered provided service is continuous within the broad definition in s 4(11).

In practice the Act therefore touches virtually every NSW employment relationship except those carved out by more generous instruments or the metalliferous mining exclusion. Its record-keeping, notification and director-liability provisions affect compliance teams, payroll providers, company boards and legal advisers. The portable-scheme interface affects employers in three specific sectors who must now navigate dual regimes.

Key duties and rights

Workers’ rights

Entitlement to long service leave on ordinary pay after 10 years (s 4(2)(a)(i)).
Pro-rata payment on termination in defined circumstances (s 4(2)(a)(ii)–(iii) and s 4(5)).
Right to take leave in flexible blocks of not less than one day by agreement (s 4(3AA)).
Right to payment in full at commencement, periodically, or by other agreed method (s 4(7)).
Preservation of continuity despite specified interruptions (s 4(11)).
Recovery of unpaid amounts within six years via court order (s 12).
Election to remain under the Act rather than an exempt private scheme (s 5(2)(c)).
Extension of leave for public holidays (s 4(4A)).

Employers’ duties

Grant and allow taking of accrued leave at a mutually convenient time (s 4(3)).
Calculate and pay ordinary pay correctly, including the complex averaging exercises in s 3(1).
Maintain long service leave records for each worker for at least six years after cessation (s 8(3)).
Give at least one month’s notice of leave date (or less by agreement) (s 4(10)–(10A)).
Notify the Long Service Corporation before making portable-scheme-related payments (s 4A).
Refrain from giving or paying long service leave to registered portable-scheme workers unless they apply (s 4(5A)–(5B)).
Avoid any act that directly or indirectly evades the Act’s obligations (s 10(3)).
Comply with inspector requests for records and information (s 9).

Mutual rights and duties

Agreement to postpone leave resets the prescribed date for ordinary-pay calculation (s 3(2B)).
Agreement to take leave in advance is possible but does not create new accrual triggers (s 4(3A)).
Parties may agree on payment methods beyond the statutory defaults (s 4(7)(c)).

Commission and inspector powers

The Industrial Relations Commission may grant, vary or revoke exemptions (ss 5, 5A).
Inspectors may enter premises, demand records, investigate complaints and require information (s 9).
Authorised public servants may exercise the s 9(3) information power.

Director/manager obligations

Take reasonable steps (assessments, training, resources, culture) to prevent corporate breaches of ss 4 and 8 (s 10A).
Avoid aiding, abetting or being knowingly concerned in any corporate offence (s 10B).

These rights and duties are non-excludable (s 7) and prevail over inconsistent stipulations.

Penalties and enforcement

The Act creates a tiered enforcement regime. The base offence of contravening any provision carries a maximum penalty of 20 penalty units (s 10(1)). Specific offences of keeping false records, obstructing inspectors or failing to comply with lawful demands also attract 20 penalty units (s 10(2)). Anti-avoidance conduct—any act whose purpose or effect is to evade obligations or defeat the operation of the Act—carries the same maximum (s 10(3)).

Since the insertion of ss 10A and 10B in 2012, corporations and their officers face parallel liability. Section 10A makes it an executive liability offence for a director or influential manager to know (or ought reasonably to know) that a corporate offence under s 4 or s 8 is being committed and fail to take all reasonable steps to prevent it. The maximum penalty is the same as for an individual committing the underlying offence. The prosecution must prove each element beyond reasonable doubt; the section does not displace corporate liability or accessory rules (s 10A(5)–(6)). Section 10B creates a broader accessory offence for any corporate offence (not limited to executive liability offences), again with the individual maximum penalty.

Proceedings for penalties are brought in the Local Court by inspectors, union secretaries whose members are affected, or persons whose rights are impaired (s 11(1)). The court may, in the same proceeding, order payment of any money due under the Act, which then bars separate s 12 recovery (s 11(2)). Costs may be awarded and assessed. Recovery actions under s 12 for unpaid long service leave pay may be brought by the worker, or by a union official with written consent, in the Local Court or the Industrial Relations Commission in Court Session. A six-year limitation applies, subject to the 1980 Act’s two-year floor.

Inspectors have broad investigative powers (s 9), including entry at reasonable times, production of records, and written demands for copies and information where a worker complains of underpayment (s 9(3)). Disclosure of commercial secrets obtained in administration is prohibited except for statutory purposes, with ministerial permission or court order (s 9A).

The Industrial Relations Commission retains oversight of exemptions, able to review, vary or revoke them on its own motion, on application, or at the Minister’s request (s 5A). It cannot insert long service leave provisions in awards that are less favourable than s 4 (s 6).

Enforcement is therefore both civil (recovery of pay) and criminal (penalties and director liability), with a practical emphasis on record-keeping compliance and prevention of avoidance through related-entity structures or sham contracts.

How it interacts with other laws

The Act is expressly subordinate to the Commonwealth Constitution (s 2) and must be read so as not to exceed State legislative power. It is deeply entwined with the Industrial Relations Act 1996 (NSW), which supplies the definitions of “award” and “agreement” (s 3(1)), appoints inspectors (s 3(1)), deems certain persons employees (s 3(4)), and supplies the procedural framework for recovery, appeals and Commission powers (ss 11, 12, 14).

Federal legislation is engaged in two main ways. Modern awards and enterprise agreements under the Fair Work Act 2009 (Cth) can displace the Act where they are more favourable (s 5(1)(a) and the expanded definition of “award” in s 4(13)(a)). The related-corporation rules in s 4(13) expressly adopt the Corporations Act 2001 (Cth) definitions of “holding company” and “subsidiary”. Division 2B State awards under the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 are also picked up.

Three portable long service leave statutes now sit alongside the Act: the Building and Construction Industry Long Service Payments Act 1986, the Contract Cleaning Industry (Portable Long Service Leave Scheme) Act 2010 and the Community Services Sector (Portable Long Service Leave) Act 2024. Sections 4A, 4B, 4(5A)–(5B) and 5(5A) create a coordinated interface preventing double-dipping while preserving residual rights under this Act.

The Interpretation Act 1987 (NSW) applies to the transferred provisions in Schedule 1 (cl 1(4)). The Banks and Bank Holidays Act 1912 is indirectly engaged through the APEC public holiday transitional provision in Schedule 1 cl 3.

Historically the Act amended and interacted with the Industrial Arbitration Act 1940 (repealed). Savings provisions in s 13 and Schedule 1 continue to protect pre-1985 and pre-1995 award entitlements that were more beneficial.

In the employment contract itself, the Act operates as a minimum standard; any less favourable contractual term is void (s 7). Awards and agreements that are less favourable than s 4 are deemed omitted (s 13(2)), while more favourable ones continue (s 13(3)).

During the COVID-19 period, s 15C operated as an overlay on every other long service leave regime in NSW, treating stand-downs as continuous service.

Recent changes and why

The most significant recent amendments reflect three policy drivers: modernisation of record-keeping, integration with portable long service leave schemes, and pandemic response.

The Long Service Leave Amendment (Records) Act 2022 substituted s 8 with a streamlined but stricter obligation: employers must keep a “long service leave record” in the manner prescribed by regulation for at least six years after employment ends (s 8(1)–(3)). Regulations may also govern transfer of records on business succession (s 8(4)). This replaced older, less prescriptive language and was designed to improve compliance and ease enforcement in an era of digital payroll.

The Community Services Sector (Portable Long Service Leave) Act 2024 made substantial changes. It substituted ss 4A and 4B, expanded the list of portable Acts to include the new community services regime, and inserted the prohibition on giving or paying leave to registered workers without an application (s 4(5A)–(5B)). These changes prevent fragmentation between the general Act and industry-specific portable schemes while ensuring the Long Service Corporation retains oversight of payments. Section 4C was repealed as part of the same package.

The COVID-19 amendments (inserted 2020, extended 2021) added s 15C. It deems service continuous and allows accrual during stand-downs without pay caused directly or indirectly by the pandemic between 11 March 2020 and 31 March 2022 (or earlier prescribed end). The provision extends to any person who may access long service leave under any NSW Act. It was a deliberate policy choice to protect workers’ accrued entitlements during forced economic shutdowns.

Earlier but still relevant changes include the 2012 insertion of the executive liability regime (ss 10A, 10B) via the Miscellaneous Acts Amendment (Directors’ Liability) Act 2012, aligning the Act with contemporary corporate governance standards. The 2001 amendments clarified that related-corporation continuity rules apply to terminations after the amendment date regardless of when service was performed.

Each change reflects a recurring legislative theme: the original 1955 Act has been repeatedly adapted to new industrial realities—portable entitlements for mobile workforces, digital compliance, pandemic shocks, and director accountability—without disturbing the core 2-months-per-10-years formula.

Court challenges and controversies

Although the Act has not generated the volume of High Court litigation seen in federal workplace law, several recurring issues have produced appellate authority and Industrial Relations Commission decisions.

The calculation of “ordinary pay” has been fertile ground. Courts have grappled with the correct averaging period, the treatment of irregular bonuses, and whether discretionary incentives fall within s 3(1)(c). The 5-year look-back and the “greater of” tests have produced disputes when workers’ hours or rates fluctuated. The s 3(2C) cap on bonus inclusion (introduced to prevent windfalls for highly paid executives) has been criticised as undermining the Act’s protective purpose for lower-paid workers.

Continuity of service under s 4(11) has been tested in transmission-of-business cases. Tribunals have examined whether a purported sale of a business was genuine or a device to break service. The related-corporation deeming rules in s 4(13) have been invoked to argue that movement between subsidiaries should not reset the 10-year clock. The two-month re-employment window in s 4(11)(a1)(vii) has produced litigation where employers argued that a worker’s return after a longer break severed continuity.

The exemption power under s 5(2) has generated controversy. Employers operating private trust funds or insurance-backed schemes have sought exemptions, only for unions to argue that the scheme’s funding security or portability was inferior. The Commission’s power to review exemptions of its own motion (s 5A) has been used where schemes failed to keep pace with statutory improvements.

Anti-avoidance litigation under s 10(3) has targeted “contractorisation” arrangements and artificial corporate structures designed to prevent 10-year service crystallising. Director liability under the new ss 10A and 10B is still relatively untested but has prompted compliance audits and increased insurance premiums for boards.

The COVID-19 provision in s 15C, while temporary, raised questions about the breadth of “direct or indirect result of the COVID-19 pandemic”. Some employers argued that stand-downs caused by general economic downturn rather than specific public-health orders should not qualify. The Industrial Relations Commission’s interpretation ultimately favoured workers, consistent with the remedial purpose of the section.

Controversies also surround the interaction with federal awards. Where a modern award contains a long service leave clause, debate continues over whether it is “more favourable” on an overall or clause-by-clause basis. The Act’s prohibition on payment in lieu (s 4(8)) has been contrasted with more flexible federal schemes, producing calls for harmonisation.

Overall, case law emphasises the Act’s beneficial purpose: courts and the Commission construe ambiguities in favour of the worker, treat the continuity provisions expansively, and regard the director-liability provisions as a serious accountability mechanism rather than a mere formal add-on.

Gotchas

Most practitioners assume long service leave is a simple “10 years = 2 months” rule. In reality the Act is riddled with traps that catch even experienced HR teams.

First, the ordinary-pay calculation is not the worker’s current weekly wage. It can be the greater of the rate on the prescribed date or a 5-year average, plus averaged bonuses and the deemed value of board. A worker promoted in year 9 may still have ordinary pay calculated on earlier lower rates if the 5-year average is higher—an outcome few employers anticipate. The s 3(2C) cap on bonuses is often overlooked until an audit reveals overpayments to senior staff.

Second, the continuity rules in s 4(11)(a1) are broader than most realise. An employer-initiated break “for any reason other than those referred to in subparagraphs (iii)–(v)” followed by re-employment within two months still counts as continuous service, yet the break period itself is not counted toward the length of service. This can produce surprising 9.8-year “10-year” anniversaries.

Third, the related-corporation rules in s 4(13) operate asymmetrically. Service with a subsidiary can be tacked onto service with the holding company, but termination by one related entity does not trigger payout if the worker moves to another within two months. Corporate groups that restructure frequently can inadvertently preserve entitlements they intended to reset.

Fourth, the prohibition on giving leave to registered portable-scheme workers without an application (s 4(5A)) is a recent gotcha. An employer who, in good faith, grants leave to a long-serving cleaner registered under the 2010 Act risks committing an offence even if the worker never claimed portable benefits. The mandatory notification to the Long Service Corporation under s 4A adds another compliance step many payroll systems have not yet been updated to handle.

Fifth, advance leave under s 4(3A) does not count as an entitlement for the purposes of the main accrual formula. Employers who grant generous advance leave can find themselves paying twice when the worker later reaches the 10-year mark.

Sixth, the six-year record-keeping obligation in s 8(3) runs from the date the worker ceases to be employed, not from the date leave is taken. Businesses that acquire other entities frequently inherit record-keeping obligations stretching back more than a decade.

Seventh, the director liability provisions are strict. The “reasonable steps” defence in s 10A(7) requires evidence of compliance culture, regular professional assessments, training, and resources. A generic whistle-blower policy will not suffice; regulators now look for board minutes, external audits and targeted long-service-leave training.

Finally, the COVID-19 provision in s 15C, though expired, continues to affect accrual calculations for workers stood down in 2020–2022. Service that would otherwise have been broken is still treated as continuous, subtly lengthening qualifying periods years later. Many employers have not updated their service-date databases to reflect this.

These gotchas explain why seemingly straightforward long service leave disputes often settle only after expensive forensic payroll reconstructions.

How to comply

Compliance begins with an accurate service register. Every worker’s start date, any approved interruptions, transmissions, related-corporation moves and COVID stand-down periods must be recorded. The register should flag impending 5-, 10- and 15-year anniversaries.

Maintain compliant long service leave records under the 2022 regulation. At minimum these must show the worker’s name, periods of service, leave taken or paid out, ordinary-pay calculations, and any agreements to postpone or take leave in advance. Retain for six years after employment ends and have a documented procedure for transferring records on business sale.

Calculate ordinary pay meticulously. For each worker approaching eligibility, run both the “prescribed date” rate and the 5-year (or 12-month) average, include averaged bonuses unless the s 3(2C) cap applies, and add the cash value of board or lodging. Document the calculation; it will be requested in any inspector notice under s 9(3).

Issue at least one month’s written notice of proposed leave dates (or obtain written agreement to shorter notice). Confirm in writing any agreement to take leave in multiple periods or in advance. Ensure payment is made in accordance with s 4(7)—either in full before leave, on normal pay days, or by another agreed method (cheque to a nominated address if requested in writing).

For workers registered under a portable scheme, do not initiate leave or payment; wait for a written application. Before making any payment, notify the Long Service Corporation in the approved form. Reconcile portable-scheme credits against this Act’s entitlements to avoid double-dipping.

If relying on an exemption under s 5(2), keep the Commission order, review it every three years, and ensure the private scheme remains at least as favourable. Advise workers of their right to opt back into the Act within three months of the exemption’s start or their employment start.

Implement director-level controls to satisfy the s 10A reasonable-steps defence: annual compliance audits by external counsel or accountants, board reporting on long service leave liability, targeted training for payroll and HR staff, and contractual indemnities and insurance that expressly cover executive liability offences.

Draft contracts, awards and policies to mirror or improve on the Act without purporting to exclude it. Include clear long service leave clauses that cross-reference the statutory minimum.

Conduct exit interviews or termination checklists that identify any accrued but untaken leave and trigger immediate payment under s 4(5) where required. For deceased workers, have a procedure to locate personal representatives and pay within a reasonable time.

Finally, maintain a relationship with the Long Service Corporation and subscribe to Industrial Relations Commission updates on exemption reviews. In a regulated environment where one missed 5-year accrual or one incorrect ordinary-pay component can compound over decades, the only sustainable compliance model is proactive, documented and audited systems rather than ad-hoc calculation at the point of entitlement.