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Long service leave: change of employer

Understand the rules and get the long service leave calculations right

On this page

  • Understand the definition of 'one employer'
  • Know how 'one employer' applies under different circumstances
  • Read our examples to help you understand the rules

One employer and LSL

Victoria's Long Service Leave Act 2018 (LSL Act 2018) sets out several situations where an employee is regarded as having been employed by one employer – even though in the strict legal sense they've worked for more than one employer.  

For the purposes of calculating long service leave (LSL), we've listed the different scenarios below that are considered as 'one employer'.

Sale or transfer of business

Where a business is sold, transferred or assigned, and an employee remains with the business, the new employer becomes responsible for the employee's LSL entitlement. The period of employment with the old employer transfers to the new employer, who becomes liable for the LSL accrued across the entire period of employment. 

It is common for the sale of business documents to reflect this liability – but such documents could not validly exclude an employee’s entitlement.

Even if the contract for the sale of business does not include contingencies to cover a transferring employee’s LSL, or even if the documents expressly say the new employer is not liable, the employee still has an entitlement with the new owner under the LSL Act 2018. 

It is important to note that, where an employee will continue with the new owner of the business, the old employer should not pay out accrued LSL to the employee. 

Although it is common for employees to be paid out any accrued annual leave at the time of a sale of a business, this does not break continuous employment for LSL purposes under the LSL Act 2018.

If an employee is dismissed by the old or new business owner but is re-employed by the new business owner within 12 weeks’, employment will remain continuous for LSL purposes.

If an employee does not remain with a business that has changed hands, the employer who sold the business is responsible for calculating and paying out any LSL entitlements to which the employee has become entitled.

See our example outlined below.

Insourcing and outsourcing

If an employer (host employer) outsources work to another employer, such as an agency, and as a result of a contract between the two, an employee moves from the host employer to the contracted employer, the contracted employer must recognise the employee’s continuous employment with the host employer. 

This rule also applies if work is insourced. In this circumstance a host employer must recognise continuous employment with the previously contracted employer. 

Where work is contracted in and out over a period the same rule applies. In these circumstances an employee will be taken to have worked for one employer for the purposes of accruing LSL. 

Example - Leanne

Leanne is employed in IT for an accounting company, Accounting Co Ltd.

Accounting Co decides to outsource its IT work to IT Contractors Pty Ltd. As a result, Leanne continues to work at Accounting Co, but is now employed by IT Contractors. 

After a year, Accounting Co decides that it no longer wants to use IT Contractors and takes its IT operations back in-house. As a result, Leanne once again becomes employed by Accounting Co. 

Even though Leanne has worked for two different employers during these changes, she will be entitled to LSL as if she were employed by only one employer.    

Employee records 

As the new owner of a business becomes automatically responsible for an employee’s period of employment with the first owner under the LSL Act 2018, it is important that the new owner receives all employee records relating to their LSL with the first owner – this will ensure the new owner is aware of the LSL entitlements of any continuing employees.

An employer must keep accurate records of the employee’s LSL during the entire period of employment and retain these for at least seven years after the employment ends or the employee dies.

Records must be kept in the form (if any) prescribed by the regulations made under the LSL Act 2018 . If no form is prescribed, an approved format is available below under ‘Handy Tools’. 

It is an offence to fail to keep records in the manner prescribed by the LSL Act 2018. The penalty for this offence is 12 penalty units for a natural person, and 60 penalty units for a body corporate. If an employer is found guilty of this offence, a criminal conviction may also be recorded.

An employer must not refuse a request from an employee to provide their LSL record. The penalty for this offence is 12 penalty units for a natural person, and 60 penalty units for a body corporate.

Authorised officers can require a person to provide information or documents to monitor compliance with the LSL Act 2018, including an LSL record.

For more information see: LSL Act 2018 Fact Sheet 8 - record keeping (DOCX 151.77 KB)DOCX icon

Use our template below to keep proper records of your employees long service leave.

Long Service Leave Record (DOC 32 KB)DOC icon

Related body corporate or substantially the same directors or management

Where an employee has worked first with one employer and later works with a related corporation, or a corporation with substantially the same directors and/or management, then employment will be recognised as continuous. 

In such a case, the related corporation will assume liability for the employee's long service leave entitlement from the time when the employee commenced with the previous employer(s).

Apprentices

If an employer re-employs an apprentice within 52 weeks after completion of the employee’s apprenticeship, then the period of their apprenticeship counts towards the period of employment with that employer.

Some apprentices are employed by a Group Training Company, which places the apprentice with a host employer. The apprentice may later become employed by the host employer directly. In this circumstance the rules that apply to insourcing and outsourcing will apply. That is, the continuous employment with the Group Training Company must be recognised by the host employer.

Multiple locations

Some employees may work in a variety of locations over a period of years. As LSL entitlements vary between states, the question then arises as to which LSL legislation applies to the continuous employment – the answer will always depend on the particular circumstances of the case so you should seek advice about your particular circumstances in this situation.

Overseas service is likely to be included for the purposes of accruing LSL, if it's part of continuous employment with one employer.

Transfer of assets

There are occasions where a business' assets are transferred to another business – even where the business itself has not been sold. A transfer of assets may occur in a range of circumstances, such as: 

  • where one business had a tender to operate a facility – for example a car park, shopping centre or government service – and loses that tender
  • where a retail business or facility is closed rather than sold – but the assets within that business or facility are transferred to another person or business, which then employs the employees of the previous business.
  • where a business may close-down rather than be sold, but its assets are transferred to another employer
  • Assets include both tangible and intangible assets. Intangible assets may include good will, brand recognition, customer lists etc.

A common example of the above situation is where a business goes into liquidation and the liquidators sell the former business' assets to a new business – with that new business picking up the employees of the former (liquidated) entity. 

Some businesses believe that all accrued employee entitlements (including LSL) are covered by the Fair Entitlements Guarantee (FEG) in the case of liquidation. 

However, where the LSL Act 2018 applies, FEG does not cover LSL entitlements if there has been a transfer of assets from a liquidated entity to a new business that continues the employment of the employees of the liquidated entity.  

Under Section 11(7) of the LSL Act 2018, new businesses to which assets are transferred also adopt the LSL liability for any employees whom they employ within 12 weeks of the termination of their employment by the previous employer. This occurs where the employees are employed by a new business to continue to perform duties in connection with any of the transferred assets formerly used in the carrying on of the old business (in this example, the liquidated business), or in relation to other assets of a similar kind.

Note: LSL record keeping requirements also apply in these circumstances. For more information see “Employee records”, above.

Example: Robyn's employer sells the business

Robyn has been continuously employed by John's Tyres for 9 years. The owner of John's Tyres sells the business to Terry. When the business is taken over, Terry continues to employ Robyn – and there is no break in service. In this situation, Robyn's employment is continuous.

Terry becomes liable for Robyn's accrued LSL over the past nine years, and for any LSL that accrues in future.

Example: A hotel goes into liquidation –transfer of assets

Company A is a hotel. It goes into liquidation and the liquidators sell the assets – such as hotel room furniture, linen, and computers to Company B.

Company B begins to operate the hotel as a new concern, and employs the employees who worked for Company A within 12 weeks of the date their employment ended with Company A.

Under Section 11(7)-(8) of the LSL Act 2018, new businesses to which assets are transferred from an existing business adopt the LSL liability for any employees whom they employ within 12 weeks of the termination of their employment by the previous employer – even where the previous employer was in liquidation. 

In this instance, Company B must recognise the employees’ period of continuous employment with Company A as a result of the transfer of assets from Company A to Company B.

If you own, are looking to purchase, or start a small business with under 20 employees, you may be eligible for our Long Service Leave Small Business Information Service (LSLSBIS).

LSLSBIS offers one-on-one information and advice regarding your responsibilities under the LSL Act 2018.

To access this program, contact Wage Inspectorate Victoria by giving them a call on 1800 287 287 or send them an email.

Need further assistance?

Looking for further assistance and advice about long service leave? Email Wage Inspectorate Victoria or call 1800 287 287.

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