Last week, we celebrated a massive milestone here at Nova Business Services. Our incredible colleague, Craig, marked his sixteenth anniversary with the company. Congratulations to Craig, and thank you for your unwavering dedication. We appreciate you greatly.
Having a team member stay with your business for over a decade and a half is a wonderful achievement. It speaks volumes about workplace culture and mutual loyalty. However, having your very own Craig also brings up an essential administrative responsibility that many business owners overlook until the last minute: long service leave.
To everyone else running a business, Craig’s anniversary is a perfect reminder to make sure you have a solid plan for long service leave with your staff. Whether you have a company lifer or someone brand new to the business, you need a payroll plan for all kinds of leave.
What is long service leave?
In Australia, long service leave is a period of paid leave granted to employees who have been with the same employer for a long period. While the specifics can vary slightly depending on the state or territory your business operates in, an employee is generally entitled to this leave after ten years of continuous service, with pro-rata entitlements often kicking in earlier, around the seven-year mark.
Why you need to plan ahead
When an employee reaches their milestone, they are entitled to a substantial chunk of paid time off, usually around two months. If you have not been provisioning for this financially, paying a staff member who is not actively working for two months can put a severe strain on your business cash flow. You also need to consider the cost of potentially hiring and training a temporary replacement to cover their workload.
This is why a robust payroll plan is non-negotiable.
How to manage your leave provisions
Managing leave is not just about keeping a tally of days off. It involves proactive financial planning. Here are a few steps to get your payroll in order:
– Track start dates meticulously. Knowing exactly when each employee started ensures you can forecast when their long service leave entitlements will apply.
– Understand state legislation. Ensure your payroll software is configured to comply with the specific long service leave rules in your state or territory.
– Accrue funds over time. Do not wait until year nine to start saving. Treat long service leave as an accumulating liability on your balance sheet from day one.
– Review at the end of the financial year. With the new financial year just days away, right now is the ideal time to review your payroll setup.
Preparing for all types of leave
While long service leave requires long-term planning, your payroll strategy must account for all types of leave. Annual leave, personal leave, and even unpaid leave have compliance requirements under the Fair Work Act. Ensuring your payroll software accurately accrues and deducts these balances protects your business from compliance breaches and keeps your staff happy.
A new staff member might not seem like a long service leave risk today, but time flies. Before you know it, they could be celebrating their sixteenth anniversary just like Craig.
If you are feeling unsure about your current payroll setup, Nova Business Services is here to help. We specialise in ensuring your books and payroll are compliant, accurate, and ready for whatever the future holds. Let us handle the numbers so you can focus on building a business that your employees never want to leave.
Our team is here to support you and your business in many different ways, give us a call on 1800 668 225 or reply to this blog by clicking here to ask us any questions.
