Long Service Leave in NSW: Rules, Calculations, and Pro Rata

Long service leave (LSL) in New South Wales is one of the most established employee entitlements in Australia. Governed by the Long Service Leave Act 1955, NSW was among the first jurisdictions to legislate long service leave, and the framework has been refined over decades. For employers, getting LSL wrong can lead to significant financial liabilities, Fair Work complaints, and reputational damage.

This guide covers everything NSW employers need to know — from qualifying periods and entitlement calculations to pro rata access, breaks in service, and what happens when an employee is terminated.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Employment law is complex and subject to change. Consult a qualified employment lawyer or the NSW Industrial Relations website for guidance specific to your organisation.

What Is Long Service Leave?

Long service leave is an extended period of paid leave granted to employees who have completed a lengthy period of continuous service with the same employer. It recognises loyalty and sustained contribution, and gives employees the opportunity to take an extended break from work.

In NSW, long service leave applies to most employees, including full-time, part-time, and some casual workers. It sits alongside (and is separate from) annual leave, personal/carer’s leave, and other NES entitlements.

Qualifying Period in NSW

Under the Long Service Leave Act 1955, employees in NSW become entitled to long service leave after 10 years of continuous service with the same employer.

This is the primary threshold. Once an employee reaches 10 years, they have a vested right to take their long service leave — and that right cannot be removed or reduced by agreement.

What Counts as Continuous Service?

Continuous service in NSW includes:

• All periods of paid leave (annual leave, personal leave, parental leave on pay)
• Periods of unpaid leave up to 6 months (unless the employer and employee agree to exclude them)
• Any period where the employee is absent due to illness or injury, provided they return to work
• Time spent on workers’ compensation
• Periods of stand-down

It does not typically include:

• Unauthorised absences
• Periods of unpaid leave exceeding 6 months (unless agreed otherwise)
• Time worked for a different employer (NSW does not have general portability provisions, unlike some industries)

Casual Employees

Casual employees can qualify for long service leave in NSW if they have worked on a regular and systematic basis for the same employer over the qualifying period. The key test is whether there was a pattern of engagement that, taken as a whole, constitutes continuous service.

Entitlement Amount

The standard LSL entitlement in NSW is 2 months (8.6667 weeks) of leave after 10 years of continuous service.

After the initial 10 years, employees accrue additional long service leave at the rate of one month (4.3333 weeks) for every 5 years of additional service.

Here’s how that looks in practice:

Years of Service	LSL Entitlement
10 years	8.6667 weeks (2 months)
15 years	13 weeks (3 months)
20 years	17.3333 weeks (4 months)
25 years	21.6667 weeks (5 months)

These figures represent calendar weeks. The entitlement is based on the employee’s ordinary working hours at the time they take the leave.

Pro Rata Access After 5 Years

One of the most important features of NSW’s long service leave scheme is the pro rata entitlement on termination after 5 years of service.

If an employee’s employment ends for any reason after they have completed at least 5 years of continuous service — whether through resignation, dismissal, redundancy, or retirement — they are entitled to a pro rata payment of their long service leave.

The pro rata calculation is straightforward:

Pro rata LSL = (Years of service ÷ 10) × 8.6667 weeks

Example: An employee who resigns after 7 years of service is entitled to:

• (7 ÷ 10) × 8.6667 = 6.0667 weeks of LSL pay

This is a significant obligation for employers, because it means that any employee who has passed the 5-year mark will be entitled to a payout on termination, regardless of the circumstances.

When Pro Rata Does Not Apply

Pro rata entitlements do not apply if:

• The employee has less than 5 years of continuous service
• The employee was dismissed for serious and wilful misconduct (and had less than 10 years of service)

Note: If an employee has completed 10 or more years of service, they are entitled to the full accrued LSL even if dismissed for misconduct.

Payment Calculations

Long service leave in NSW must be paid at the employee’s ordinary rate of pay at the time the leave is taken (or at termination, if it’s being paid out).

What Is the Ordinary Rate of Pay?

The ordinary rate includes:

• Base salary or wages
• Regular allowances that form part of the employee’s normal remuneration
• The cash value of any board or lodging provided as part of the remuneration package

It does not include:

• Overtime payments
• Irregular bonuses
• Shift loadings (unless these are considered part of the employee’s ordinary pay pattern)

Calculation Example

Full-time employee earning $85,000 per year (base salary):

• Weekly rate: $85,000 ÷ 52 = $1,634.62
• LSL entitlement after 10 years: 8.6667 weeks
• Total LSL value: $1,634.62 × 8.6667 = $14,166.71

Part-time employee working 25 hours per week at $35/hour:

• Weekly earnings: 25 × $35 = $875
• LSL entitlement after 10 years: 8.6667 weeks
• Total LSL value: $875 × 8.6667 = $7,583.36

Taking Leave vs. Receiving a Payout

Employees can choose to take their long service leave as actual time off work, or — in some circumstances — receive a lump sum payment. However, the Act encourages employees to take the leave rather than cash it out. Employers cannot force employees to accept a payout in lieu of taking leave while they remain employed.

On termination, any accrued but untaken LSL must be paid out.

How Long Service Leave Interacts with Termination

When an employee’s employment ends in NSW, the employer must assess and pay out any LSL entitlement as part of the final pay. Here are the key scenarios:

Resignation After 10+ Years

The employee is entitled to the full accrued LSL balance. This must be paid at the ordinary rate of pay.

Resignation After 5–10 Years

The employee is entitled to a pro rata payment based on their years of service.

Redundancy

All LSL entitlements (whether full or pro rata) must be paid out on redundancy. This applies from 5 years of service onwards.

Dismissal for Misconduct

If the employee has 10 or more years of service, they are still entitled to their full LSL, even if dismissed for serious misconduct.

If the employee has between 5 and 10 years of service, they lose the pro rata entitlement if dismissed for serious and wilful misconduct. Ordinary misconduct or poor performance does not remove the pro rata entitlement.

Death of an Employee

If an employee dies during employment, any accrued LSL entitlement is paid to the employee’s estate.

Breaks in Service

Not every absence from work breaks continuity of service. As mentioned earlier, most forms of authorised leave — paid or unpaid — preserve continuity.

However, if an employee resigns and is later re-employed by the same employer, the previous service generally does not count towards the new qualifying period, unless:

• The break between employments was less than 2 months, and
• The employer agrees to recognise the prior service

This is an important distinction. If you rehire a former employee, check whether any prior service counts before assuming a fresh start on the LSL clock.

Portability

NSW does not have a general long service leave portability scheme that applies across all industries. Unlike some states, employees in NSW cannot carry their LSL entitlements from one employer to another as a general rule.

However, there are industry-specific portable LSL schemes in NSW, including:

• Building and construction — administered by the Long Service Corporation
• Contract cleaning — also covered by the Long Service Corporation

In these industries, employers are required to register workers and make regular contributions to the portable scheme. Workers accumulate credits regardless of which employer they work for, and can claim their LSL once they reach the qualifying period.

If your business operates in one of these industries, you have separate registration and reporting obligations under the relevant scheme.

Common Compliance Mistakes

Employers in NSW frequently make errors with long service leave. Here are the most common:

1. Failing to Track Service Accurately

Many employers don’t maintain accurate records of start dates, breaks in service, and periods of unpaid leave. This makes it difficult to determine when an employee qualifies for LSL and what the correct entitlement is.

2. Miscalculating Pro Rata Entitlements

The 5-year pro rata threshold catches many employers off guard. If you’re not aware of this obligation, you may underpay departing employees and face claims.

3. Using the Wrong Pay Rate

LSL must be paid at the ordinary rate of pay at the time the leave is taken or paid out — not the rate that applied when the leave was accrued. If an employee’s pay has increased over 10 years, the LSL payment must reflect their current rate.

4. Not Paying LSL on Termination

All accrued LSL must be paid out when employment ends (subject to the pro rata and misconduct rules above). Failing to include LSL in the final pay is a compliance breach.

5. Ignoring Casual Employee Entitlements

Regular casuals can and do qualify for LSL. If a casual has worked regularly for your business for 10 years, they are likely entitled to long service leave.

Record-Keeping Obligations

Under NSW law, employers must keep records of:

• Each employee’s start date and periods of service
• Any breaks in service and whether they count towards continuous service
• LSL taken and the dates it was taken
• LSL payments made

These records must be kept for at least 7 years after the employee’s employment ends.

Managing Long Service Leave with Software

Tracking long service leave manually — especially across a workforce with varying start dates, service breaks, and employment types — is a recipe for errors. Modern leave management software can automate LSL accrual tracking, flag upcoming milestones, calculate pro rata entitlements, and ensure that final pay calculations are accurate.

If your team is still relying on spreadsheets to track long service leave, you’re increasing your risk of compliance breaches and underpayments.

Key Takeaways for NSW Employers

• Employees are entitled to 8.6667 weeks (2 months) of LSL after 10 years of continuous service
• Pro rata access applies from 5 years of service on termination
• LSL is paid at the ordinary rate of pay at the time of taking or payout
• Dismissal for serious and wilful misconduct can remove pro rata entitlements (5–10 years only)
• Portability applies only in specific industries (construction, contract cleaning)
• Accurate record-keeping is essential — and legally required for 7 years

Long service leave is a significant financial liability that grows with every year of service. Understanding the rules, maintaining accurate records, and using the right tools to track entitlements will help you stay compliant and avoid costly mistakes.