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Long Service Leave inAustralia: Rationale,Application and Policy IssuesJohn Burgess a , Anne Sullivan a & Glenda Strachan aa Faculty of Business & Law , University of NewcastlePublished online: 10 Apr 2013.

To cite this article: John Burgess , Anne Sullivan & Glenda Strachan (2002) LongService Leave in Australia: Rationale, Application and Policy Issues, Labour &Industry: a journal of the social and economic relations of work, 13:1, 21-38, DOI:10.1080/10301763.2002.10669254

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Long Service Leave in Australia: Rationale, Application and Policy Issues*

John Burgess, Anne Sullivan and Glenda Strachan

Abstract

Long service leave (LSL) has existed as statutory public service entitlement in Australia since the 1860s. Since that time LSL has been extended into the private sector and across most industry groups. More recently LSL has been reviewed by the Queensland Industrial Relations Commission (2000). Central to the evaluation and discussion of LSL are a nuinber of issues. First is the question whether LSL remains relevant given apparent employment instability and career turhulence. Second is the question whether the conditions of LSL should reflect changes in 11-ur~/im:e structure. Third is the question whether jlexibilities can and should be introduced into LSL conditions and entitlements. This article presents an overview u(the issues associated with LSL in Australia cmd briefly reviews the Queensland Industrial Relations Commission Inquiry into LSL.

The Nature, Rationale And Significance OfLSL

Long Service Leave (LSL) originated with the colonial civil service administration of the colonies of South Australia and Victoria. Both colonies passed acts in 1862 that provided between six and twelve months paid leave for civil servants to return to Britain after ten years service in the colonies. LSL gradually was extended to other states and subsequently to Commonwealth civil servants. Up until the 1940s, LSL was largely a benefit confined to public servants. From the 1950s onwards it began to be extended via statutory provision into private sector awards by State tribunals. All of the States extended LSL into awards in the 1950s.

The history of LSL is discussed in more detail both by Selby (1983) and by the Australian Workers Union submission to the recent Queensland Industrial Relations Commission review ofLSL (A WU, 1999: 19-23 ). While the foundations for LSL lay with the administration of empire, the principles for LSL have largely remained unchanged. It is a reward for continuity of service and its purpose is to provide a respite from continuous

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22 LABOUR & INDUSTRY, Vol. I 3, No. I, August 2002

employment. In retrospect LSL today seems an enlightened development, enabling workers to pursue non-work activities while on paid leave. It offers the opportunity for paid leave from work while maintaining job tenure.

In its origins and application, a few features about LSL stand out. First, it was to provide respite for those who were separated by distance between 'home' and workplace. Second, it was a benefit for those who were relatively high in the colonial administration hierarchy. Third, it was confined to the public sector. Fourth, it was implicitly confined to full-time and male workers. Overall the application and eligibility was very restrictive and confined to an elite of the workforce.

While the precedent helped secure its spread to other public service workers, the reason for the eventual spread into the private sector remains unclear. Given the spread of LSL into awards in the 1950s, largely a period oflabour shortage, it may have made sense to employers who wished to secure and reward long-term job attachment. In 1951 the New South Wales government legislated that LSL be extended into all agreements and awards for the purposes of reducing labour turnover, rewarding continuous service with the one employer and providing a respite from work in order to return to work with renewed commitment (QCCI, 1999: 5). Similar legislative action in other states extended the application ofLSL into many awards (A WU, 1999: 23).

LSL is an entitlement that is fairly unique to Australia, although there are other countries that reward continuity of service. In Britain and Greece there is a link between continuity of service and the length of annual leave. In Canada, some provinces (for example British Columbia) have legislated for extended annual leave after set periods of continuous service. New Zealand has LSL provisions in some employment contracts but the required length of service is typically longer and the length of the entitlement typically shorter than found in Australia (Labour Ministers Council, 1999).

In what follows, the discussion connects LSL to a number of important contemporary policy issues surrounding employment and working conditions. First is the access and application of employment benefits, including LSL, to the increasing number of Australian workers (the majority of whom are female) who have non-standard emp.loyment arrangements. Second is the scope for incorporating LSL into the debate over innovative arrangements for integrating work and family life and for providing access to paid leisure time. LSL stands out for being one of the earliest formal attempts to develop and implement a national sabbatical entitlement for employees. Third, given the evidence of increasing average working hours for full-time employees, the increasing number of workers who are working very long hours, and the expansion in unsociable working arrangements, LSL becomes extremely relevant for its original purpose, as a form of respite leave. Fourth, there is interest in how LSL has evolved and been incorporated into the workplace bargaining regime. To what extent have LSL arrangements been modified or evolved under this regime? Fifth, LSL constitutes one of the largest accrued employee entitlements. The issue of protection and access to entitlements has been firmly placed on the national policy agenda following several corporate failures over the past three years. Finally, LSL is also a form of social insurance in the case of job loss. Issues of access, eligibi I ity and

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Long Service Leave in Australia: Rationale, Application and Policy Issues 23

sustainability become important in this context, since LSL can sustain job search and living standards in the transition periods between jobs.

The Conditions Associated With Access And Entitlements

The qualifying conditions for LSL require continuous service for a specified period. Upon the completion ofthis period the worker is eligible for LSL on the basis of a fixed amount of time per year for every year of service. Access to the LSL generally requires agreement with the employer or some minimum period of notice of intention to take LSL.

The standard period of continuous service is ten years. The standard term of the entitlement is thirteen weeks. Howev.er, there can be variations either way in terms of the service requirement and the entitlement (see below). LSL does not have to be taken when it falls due, since it may be accumulated or only part of the full entitlement can be taken. In the event of the termination of employment, an employee is entitled to their accumulated LSL entitlement in the form of a cash payout provided they have been employed for some minimum term.

To the above conditions there are variations. Continuous service may include part­time employment; in this case LSL accrues on a pro-rata basis. The eligibility period can be more or less than ten years, and the entitlement can be more or less than thirteen weeks. In some awards and agreements, the entitlement may accrue at an accelerated rate after ten years service. Also, the entitlement may in some cases be cashed out under certain agreements. The Labour Ministers Council report ( 1999, appendix I) contains a table of LSL entitlements across different jurisdictions and sectors. In the public sector the standard qualifying period is ten years and the standard entitlement is thirteen weeks paid leave; the exception is Western Australia where the qualifying period is seven years. In the private sector jurisdictions of Tasmania, Victoria, Western Australia and the Commonwealth, the qualifying period is fifteen years for thirteen weeks leave; in New South Wales and the Australian Capital Territory the ten years qualifying period results in two months paid leave; while in the Northern Territory the paid leave is thirteen weeks for ten years service.

LSL is an employee entitlement that is potentially lost when a business goes into liquidation. This issue is relevant in the light of recent Australian corporate collapses such as HIH Insurance, One Tel and Ansett. For employees with relatively long service, the entitlement loss stands to be considerable. For many long-serving employees, LSL constitutes their most significant entitlement and acts as an important financial buffer in the period between jobs. Access and protection of employee benefits remains contentious in the face of the collapse oflarge companies, with l~rge number of employees affected.

Who Gets LSL? Trends

Australian Bureau of Statistics (ABS) data on job duration suggest that around one quarter of current employees have a job duration often years or more (Labour Ministers Council, 1999: 8). This is the percentage who would be eligible to take LSL if they so

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24 LABOUR & INDUSTRY, Vol. 13, No. /, August 2002

wished. Not all employees exercise their LSL entitlement on completing the required period of service. There are also employees who are accruing LSL entitlements with less than ten years of service, and there are some awards and agreements where less than ten years service is required before an employee is eligible for LSL. Additionally, in some awards and agreements the employee may have pro-rata access to entitlements despite serving less than the required period for qualifying for full entitlements.

The ABS has published a series on employment benefits and entitlements since the mid-1970s. However, it is only since 1984 that the series has included LSL. The series enables a mapping of the trends in LSL access.

Ta~le 1: Employee eligibility to LSL entitlement(%)*

Year Male Female Total FT PT Total FT PT Total FT PT

1984 76.9 19.9 73.8 72.5 24.8 55.9 75.7 24.0 1985 77.0 21.2 74.0 71.8 25.9 55.7 75.4 25.4 1986** 72.2 56.3 74.7 25.0 1988 75.1 9.3 70.3 73.2 23.4 53.8 73.2 22.6 1990 78.1 8.1 72.6 77.9 26.2 57.7 78.1 22.5 1991 77.7 11.3 73.2 77.7 28.6 59.1 77.7 25.3 1992 78.2 13.7 72.5 78.9 29.8 58.9 78.4 26.2 1993 76.2 10.4 69.6 77.2 30.1 57.4 76.5 25.6 1997 75.4 12.4 67.2 77.8 33.5 57.8 76.2 27.9 1998 73.2 12.2 65.0 78.3 34.0 58.3 75.1 28.2 1999 72.6 '12.7 64.1 77.8 33.5 57.3 73.9 27.9 2000 73.5 14.3 64.7 78.9 33.9 58.2 75.4 28.5

*not published 1994, 1995. not collected 1996 ** full-time, part-time employees by gender not published Source: ABS. Catalogue 6334.0 (Employment Benefits) and Catalogue 6310.0 (Weekly Earnings of Employees Distribution. later renamed as Employee Earnings,

Benefits and Trade Union Membership)

Total 66.7 66.7 65.8 63.4 66.2 67.1 66.5 64.2 62.9 62.0 61.0 61.7

Table I provides a summary of the eligibility to LSL 1984-2000. There are a few caveats concerning the data. They have not been released every year and in some instances were only released every two years. Also there have been adjustments to the survey (especially 1990) that tend to slightly overstate the extent of LSL coverage. Those attending school and older workers (aged over 65 years) were excluded from the survey (Campbell, 1996). More recently. with the trend towards sub-contracting it is likely that the number of

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Long Service Leave in Australia: Rationale, Application and Policy Issues 25

employees has been overstated through the inclusion of owner-managers of incorporated business enterprises (Campbell and Burgess, 200 I b). This would tend to place a downward bias on the proportion of employees with LSL entitlements since there is ambiguity surrounding their employment status and eligibility with respect to employee benefit access. Finally, the table refers to those workers who would be eligible for LSL if they served the full period of required service. Many of those covered by LSL would never reach the required service. Table I estimates potential access to entitlement assuming continuity of service.

Table I reveals a downward trend for males in full-time employment throughout the period and a decline then an increase in the part-time male coverage since 1993. For females there is an increasing trend in both full and part-time employment. Part of the recent full-time male decline may be attributable to the increase in owner-managers of incorporated businesses, the majority of whom are male full-time employees (Campbell and Burgess, 200 I b). Overall there has been a slight decline in the share of the workforce covered by LSL entitlements. On average males have a higher coverage than females, and full-time employees have a higher coverage than part-time employees. However, there is an increasing trend of coverage for both full-time and part-time female workers. This could reflect the fact that there has been an increase in male full-time casual employment and that more part-time employees (mainly female) are acquiring permanent or ongoing employment status (Campbell and Burgess, 200 I a). Over this period the male employee share has been declining and the full-time employee share has been declining. These structural developments would tend to reduce the LSL coverage. Re-weighting the 2000 prop01tions by the gender shares in 1984 would resu It in a lower LSL density of around 58 per cent. Re-weighting the 2000 proportions by the full-time/part-time share for 1984 would result in a LSL density of around 69 per cent. The shift to part-time employment has been a major factor in explaining the overall reduction in the LSL density. The issue of access to LSL for part-time workers was central to the Queensland LSL inquiry (discussed later).

While the extent of LSL is understated due to the problems associated with the inclusion of owner-managers of incorporated business enterprises in the employee count (Campbell and Burgess, 200 I b), the shift in the workforce coverage of LSL reflects the workforce trends towards increased feminisation and part-time employment share growth. While the costs of LSL to industry were stressed in the Queensland IRC review (2000), table I indicates that the potential liability of industry for LSL has proportionately declined as a result of these trends. Not only is the LSL density falling, the composition of that density is shifting towards the lower-earning female and part-time workers. Workforce restructuring is reducing the potential liability of employers for LSL entitlements.

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26 LABOUR & INDUSTRY, Vol. 13, No. /, August2002

Table 2 indicates that LSL has the lowest density of standard benefits for employees. This raises the question of how a benefit can be standard when it only potentially applies to 60 per cent of the workforce. Not all of those eligible for LSL will realise this benefit due to their inability to meet minimum service thresholds. Over the last decade the retirement policies of successive governments have seen a rapid growth in the superannuation density, largely as a result oflegislative action. At the same time, access to other standard benefits including holiday leave, sick leave and LSL has declined as a consequence of the growing casualisation of the workforce (Campbell and Burgess, 200 Ia).

Table 2: Distribution of standard benefits (2000) (%of employees)

BENEFIT Males Females Total

Superannuation 90.0 88.3 89.3

Holiday leave 75.6 66.2 71.3

Sick leave 75.5 65.7 71.4

Long service leave 64.7 58.2 61.7

No benefit received 8.0 10.3 9.0

Source: ABS. Catalogue 6310.0 (Employee Earnings, Benefits and Trade Union Membership).

Data on the cross-sectional density ofLSL endorse a number of prior expectations. Access to LSL is positively related to earnings, occupational status and size of establishment (see table 3). There is a great disparity across industries. Hospitality, retailing and agriculture have a relatively low LSL density, while utilities, finance and insurance and government administration and defence have a relatively high LSL density. Industries in which employment is often seasonal, fixed-term, part-time and irregular have low LSL densities. Industries where employment arrangements are ongoing, regular and typically full-time have a relatively high LSL density. As expected, the public sector has a higher density than the private sector. The gender disparity in some industries such as mining and construction reflects the very low employment numbers and share of female workers. Surprisingly, about five per cent of casual workers are eligible for LSL while 20 per cent of permanent workers are not eligible for LSL. The 20 per cent of permanents who do not have access to LSL may include those who are on fixed-term contracts and who qualify

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Long Service Leave in Australia: Rationale, Application and Policy Issues 27

for holiday and sickness benefits but have a contract that is of too short a duration to qualify for LSL. This is only conjecture. Those in irregular and low paid work, performing unskilled and semi-skilled activities in private sector small businesses, are not surprisingly excluded from LSL.

Table 3: Distribution ofLSL entitlements (2000) (% receiving LSL)

Characteristic Mal.es Females

Weekly earnings S

200-400 41.9 44.7

600-800 77.6 80.0

1000-1200 86.1 88.9

1400-1600 84.6 79.9

Industry

Agriculture 26.8 26.7

Mining 82.5 66.7

Manufacturing 74.5 66.5

Utilities 90.8 92.1

Construction 58.9 43.4

Wholesale Trade 71.0 65.0

Retail trade 42.0 38.3

Hospitality 27.0 22.5

Transport 66.5 67.4

Communication 78.9 69.2

Finance & insurance 80.2 81.0

Property & business services 51.0 51.7

Government & defence 88.1 84.8

Education 75.7 72.2

Health & community services 70.6 71.0

Cultural/recreational services 53.1 40.9

Personal & other services 75.7 50.8

Total

42.0

79.2

86.1

84.6

26.8

81.1

74.4

91.0

58.8

69.0

41.8

26.8

66.8

76.4

80.3

51.1

88.2

75.5

70.7

47.8

63.8

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28 LABOUR & INDUSTRY, Vol. I3, No. I, August 2002

Table 3: Distribution of LSL entitlements (2000) (% receiving LSL)- (Cont'd)

Characteristic Males Females

Weekly earnings$

200-400 41.9 44.7

600-800 77.6 80.0

1000-1200 86.1 88.9

1400-1600 84.6 79.9

Occupation

Manger & administrator 71.9 73.9

Professional 72.8 76.0

Associate professional 68.4 69.0

Trades person 69.8 50.0

Advanced clerical/service 68.4 61.1

Intermediate clerical/service/sales 68.6 58.6

Intermediate production/transport 64.9 56.0

Elementary clerical/sales/service 41.7 33.9

Labourers 43.7 40.1

Sector

Public 88.2 80.5

Private 60.0 51.3

Employment Status*

Permanent 80.7 81.8

Casual 5.1 4.9

Size of location *

Less than 10 40.7 35.8

10-19 54.7 47.7

20-99 70.6 62.9

100 or more 82.6 76.0

*for 1999, not available 2000

Total

42.0

79.2

86.1

84.6

72.3

74.5

68.6

67.9

62.2

61.5

63.7

36.5

42.3

84.0

56.1

81.1

5.0

38.5

51.4

69.9

79.9

Source: ABS, Catalogue 6310.0 (Employee Earnings, Benefits and Trade Union Membership)

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Long Service Leave in Australia: Rationale, Application and Policy Issues 29

LSL In Collective And Individual Agreements

LSL has historically been a condition of employment that has been enshrined through legislation and flowed through industrial relations tribunal decisions into awards. However, over the past decade in Australia the emerging main vehicle for agreement-making has been collective bargaining (Macdonald, Burgess and Campbell, 200 I). Of relevance is whether the shift in the bargaining regime has had an impact on the extent, access and form ofLSL. Specifically, ofinterest is the extent to which LSL has been bargained over in terms of its access, its portability, and the size and conditions of the entitlement.

There has to be some caution exercised in reviewing the evidence from available enterprise agreements. First, not all workers are covered by such agreements. That is, those outside of registered agreements ~ay still have access to LSL through awards and unregistered agreements. Second, the industry coverage is very uneven, so that in an industry with relatively few agreements each agreement has a high importance relative to the total. Third, the agreements may often only reaffirm what already exists or is in awards, so that no specific mention of LSL does not mean that an issue has not been negotiated or is not included in the agreement. Finally, LSL may be available under state legislation and independent of awards.

With these caveats in mind, we refer to the Department of Employment, Workplace Relations and Small Business (DEWRSB) agreements database for 1998 and 1999 (DEWRSB, 2000). Forty four per cent of certified agreements contained LSL provisions, covering 55 per cent of employees. This can be compared with annual leave in 51 per cent of agreements, covering 73 per cent of employees, or parental leave in II per cent of agreements, covering 23 per cent of employees (DEWRSB, 2000: 3 7). The incidence was much greater in the public sector as opposed to the private sector. For all the agreements, the coverage for males and females, and for full-time and part-time employees is very similar. In terms of innovative family-friendly provisions, there are no innovative leave arrangements listed that involve LSL directly, though 21 per cent of provisions included access to other leave arrangements (unspecified) for caring purposes (DEWRSB, 2000: 43-48). In terms ofthe provision ofLSL by industry, the highest level of coverage was 74 per cent for agreements in the hospitality sector while the lowest was 37 per cent in the construction sector (DEWRSB, 2000, appendix D, table 1 ). However, this is comparing 12 I agreements in hospitality with 4716 agreements in construction. The DEWRSB report suggests that LSL is not a provision that is being actively bargained over or modified through the agreement-making process. Interesting is the fact that, despite the discussion over work and family matters and the role of enterprise bargaining as a facilitating medium for such arrangements (Sullivan, Strachan and Burgess, 200 I), LSL has not been included in the flexibility arrangements associated with the better integration of work and family life.

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Long Service Leave in Australia: Rationale, Application and Policy Issues 31

Many of the agreements follow the norms set out for the industry in previous awards. However, there are variations across industries in terms of qualifying period and the extent of the entitlement. For example, in the coal industry the service period is eight years and the duration of leave is thirteen weeks (see Northern Wagons Industrial Agreement, 2000).ln the timber industry the required period of service is fifteen years and the entitlement is twelve weeks (see Austral Softwoods Certified Agreement, 1999). Table 4 sets out the range of entitlements, qualifying periods and associated conditions for a sample of the 1546 agreements on the ADAM (Agreements Database Monitor, University of Sydney) database that contain LSL provisions. The purpose of the sample is to illustrate the diversity of arrangements not to represent the average of arrangements.

For a minority of agreements LSL is the same as the statutory entitlement. After ten years service the minimum entitlement ranged from eight weeks (NRMA Call Centres) up to 19.5 weeks (St Michaels College). In general the rate of entitlement is pro rata beyond ten years, but there are notable exceptions (see Austac and Wollongong City Council). The minimum qualification period ranges from five y.ears (BHP Reinforcing Products) to fifteen years (Bank of Queensland). Pro rata payments accrue on termination for a minimum period of one years service (Commonwealth Bank) up to ten years service (Bank of Queensland). It is interesting to note the divergence within the same industry. A small number of agreements (for example Wollongong City Council) provide for a leave loading on LSL entitlements. In general some sectors stand out in terms ofbeing relatively generous with respect to LSL provisions (for example public service, mining) while other sectors are relatively parsimonious (for example insurance/financial services). For some agreements, generally associated with the public sector or former public sector business enterprises (for example Commonwealth Bank, Burnett Shire Council), LSL is a statutory entitlement.

In August 1997, the then Workplace Relations Minister, Peter Reith, released a press release highlighting the possibility for leave arrangements to be cashed out (Reith, I 997). The example cited, Custom Publishing SA Agreement, allowed for the cashing out of the LSL entitlement by the mutual consent of both parties together with the possibility of doubling the pay and halving the period of eligible LSL. However, such arrangements appear to be the exception rather than the norm. There also appears to be no instances of linking LSL with other leave arrangements or any evidence of the incorporation ofLSL into a family-friendly package ofleave arrangements. Overall, LSL to date does not appear to have actively figured in the enterprise bargaining agenda.

With respect to individual agreement making through Australian Workplace Agreements (A WAs), little is known about specific content due to secrecy provisions (van Barneveld and Arsovska, 200 I). While the number of A WAs is low (covering less than 2 per cent of the workforce), it is growing, and they offer the opportunity to innovate with respect to entitlements, including LSL. The DEWRSB data base (2000: 93) reported under its work and family provisions that II percent of employees covered by A WAs had provisions for the payment of accrued LSL or payment for future LSL entitlements. This last clause is an innovative development, but it is tied to the accrued entitlement provision and no details or examples are listed.

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Policy Issue~ Related To LSL

Does LSL Remain Relevant? The growth in the part-time and casual employment density raises the.question of whether LSL remains relevant (Burgess and Mitchell, 200 I). Is respite from continuous employment service an issue for those who have only fractional hours of employment or limited duration of employment? In both cases there is an issue of equity and whether workers should be discriminated against on the basis of the hours worked or their employment status. Indeed, in the state jurisdictions (for example Queensland) there is recognition given to both part-time and casual employment access to LSL entitlements. Also, for the many multiple job-holders involving part-time jobs (Burgess and Mitchell, 200 I), part­time hours in a number of jobs make up a full-time job.

In Australia there are no restrictions on the length of working hours, and the evidence over the last decade is of an increase in average full-time hours, especially for managerial and professional workers, and a growth in unpaid overtime hours (Campbell, 1999). If anything, this suggests that there is an increasing imperative for respite from employment for many full-time employees. For these workers the respite arguments for LSL are stronger today than they were a decade ago. In addition, a growing number of workers are employed for unsociable hours (ACIRRT, 1999: I 0 1-125). The extension of full-time working hours and the growth in unsociable working hours was highlighted in the Australian Workers Union (A WU) submission to the Queensland IRC review (A WU, 1999: 44).

The future of work literature contains the suggestion that the workforce of the future will be more mobile across occupations, industries and employers and that extended duration of employment will be a thing of the past (Burton-Jones, 2000). While there may be pressures for career change and changing industry of employment, the fact remains that job duration has remained stable over the last decade with around one quarter of the workforce having an average duration of at least ten years (de Ruyter and Burgess, 2000). Hence, despite the growth in non-standard employment arrangements, the issue of respite from continuous employment remains as relevant within the workforce as it did a decade ago. On this matter, the Queensland review of LSL noted the growth in the average duration of employment from seven to ten years and suggested that the potential liability for employers militated against any improvements in LSL entitlements (Queensland Industrial Relations Commission, 2000). However, they omitted to consider that the falling full-time density of the workforce is reducing the potential employer liability.

An emerging issue in the light of the Custom Publishing enterprise agreement is the cashing out of the LSL entitlement. The cashing out ofLSL through workplace agreements directly compromises the respite rationale ofLSL. The Queensland Government submission to the LSL review opposed cashing out as being incompatible with the purpose of LSL (Queensland Government, 1999). However, taking all or part of the LSL as a cash payment enhances the flexibility of LSL and should not be an issue if it is agreed to between the parties. The cashing out option may also assist employees who wish to use the entitlement as a saving pool in order to r6duce debt, purchase a house and pay for the education of

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children. Where it does become an issue is if'cashing out' is the only option available to employees. The danger is that cashing out could become a process for eroding and eventually removing the LSL entitlement.

Where LSL may require some modification is as an entitlement that provides some security to employees in the event of job termination. Often LSL is the largest accrued entitlement available to employees who have a record of continuity of service. Since Australia has few protections regarding notice of termination and employment assistance in lieu of termination, the LSL entitlement is an important form of employee insurance that provides assistance in job search and transition into a new job in the case of corporate restructuring and closure. Not only does this provide financial assistance to workers when they are most in need, it also provides financial support for localities hard hit by job loss on occasion of closure or major restructuring. It also reduces the potential cost of the State in providing financial support for those made redundant. LSL as a form of employment insurance is an important issue that was not addressed in the Queensland review and in the submissions to the review. This provision remains extremely relevant despite the restructuring of the workforce and the discussion about the flexibility of entitlements.

Is Continuous Service A Necessary Pre-requisite For LSL? The continuity of service requirement involves a number of aspects. The service no longer has to be full-time and provision usually exists for recognition of continuous service but of differing weekly duration. The combinations of part-time and full-time engagements count for service. Likewise, entitlements to agreed paid leave periods including holiday, sickness and maternity leave are normally included in the calculation of duration for the purposes of LSL. Periods of unpaid leave may not be included in the count of continuity. Career breaks for child care or study purposes are not part of the continuity calculation. In industry schemes such as those applying to building and construction it is the total service that counts for LSL not the duration of continuous service. Employees build up service until they achieve the ten year entitlement.

Through a number of avenues continuity of employment service of the same weekly duration is no longer necessary to achieve LSL entitlement. Likewise, breaks from employment service may be recognised for LSL entitlement or at the least not disqualify a worker from crediting accumulated service. It should be recognised that workers can take longer then ten years to accrue ten years of service with the same employer. Given the growth in non-standard employment arrangements and the growing number of employees with caring responsibilities, there is a strong case for recognising deviations from the continuity of service clauses. This especially applies if conditions are to contain sufficient flexibility so as to promote a better integration of work and family life. Again, this agenda for LSL has not been explored.

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How Portable Should LSL Be? The portability of LSL appears to be in contravention of the principle of rewarding continuity of service with the same employer. However, portability has been recognised as being legitimate in those industries where the nature of production means that long­tenn employment continuity is not possible. Sectors that recognise portability include construction and mining. There also remains an employer size bias. In large organisations such as the public service, career progression and shifts between divisions and across regions does not affect entitlement. In small enterprises the opportunities for progression and job movement are constrained by the size of the enterprise. This directly creates a bias against part-time and women workers who are more heavily represented in small businesses. There remains a tension between encouraging service and job stability on the one hand and limitingjob mobility on the other. In tenns of promoting better matching in the labour market the lack of portability ofLSL impedes movement between enterprises and industries.

The tensions associated with portability are far from resolved. There are pressures for enhanced portability to encourage greater labour market mobility and to redress the bias in the system towards large enterprises. However, the issue of portability also raises additional problems when LSL entitlements differ across enterprises and industries. Enterprise bargaining tends to promote diversity in such arrangements that would tend to reduce the possibilities for portability. Portability should be encouraged as a mechanism to cover industries where employment is unlikely to be sustained since employment engagements are for periods of limited duration, to improve matching within the labour market, and to end the bias against small business. However, the problem remains that the diversity of conditions (in the absence of a norm) lim its the portability of LSL.

Flexibility Of LSL Flexibility is the rationale given for enterprise agreements, and as already indicated the Federal government has promoted flexibility with respect to LSL provisions. Once again, the nature of the package potentially compromises the concept of respite, especially if it involves cashing out or other arrangements that reduce the period of respite (for example double the rates for half the time). There are arrangements that are compatible with respite such as extending the period on less than full pay and taking the leave in smaller blocks but at more frequent intervals. There is also the possibility for integrating LSL with other workplace initiatives, especially family-friendly working arrangements. LSL could be integrated into packages involving carers and family leave and it could be accessed prior to the completion of entitlement period to cover family responsibilities. In this case the employee would debit their entitlement. What is surprising is that LSL has not been part of the agenda in tenns of facilitating a better integration of work and family responsibilities. In the DEWRSB (2000: 48) analysis of family-friendly arrangements in enterprise agreements, LSL is not mentioned.

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Long Service Leave in Australia: Rationale, Application and Policy Issues 35

Protection Of The LSL Entitlement LSL constitutes one of the largest accrued entitlements available to employees on job termination. Many awards and agreements contain clauses providing for pro rata payment of LSL on termination for a specified period less than the qualifying service. Recent corporate collapses in Australia (National Textiles, One Tel, HIH, Ansett) have highlighted the vulnerability of employee entitlements, with the insurance aspect ofLSL being severely eroded. The problem is that LSL is a contingent liability of employers, and employees have no rights in terms of how these entitlements are funded or managed. While the management of entitlements is a separate issue, the fact remains that the important insurance aspect ofLSL is lost if entitlements remain vulnerable to corporate failure.

In 2000 the Federal government established the Employee Entitlement Support Scheme following the collapse ofNational Textiles. This provided for partial support for employee entitlements through capping entitlements following corporate failure. This scheme was not comprehensive in terms of the full coverage of entitlements, and it required matching funding by the States that was not forthcoming. Bickersdyke, Lattimore and Madge (200 I) estimate that around 30 per cent of entitlements are potentially covered by the scheme. Following the collapse of Ansett, the Federal government imposed a levy on air travel to fund employee entitlements. In past years corporate collapses have resulted in around 20 thousand employees per year being at risk of entitlement loss (Bickersdyke, Lattimore and Madge, 200 I). The recent corporate collapses have involved very large numbers of redundant workers and have focussed the policy debate on the absence of a national and comprehensive approach to employee benefit protection.

The Queensland IRC Review: Extending LSL Coverage

In the decade prior to 1998, employment in Queensland grew by 3 7 per cent, with females accounting for a larger proportion of the workforce. The major portion of employment growth in. the latter part of the decade was in part-time rather than full-time jobs, a trend similar to that at the national level. Queensland had higher levels of part-time and casual employment than the rest of Australia and higher levels of self-employed and contractors than Australia generally during the 1990s (Industrial Relations Taskforce, I998: 37).

In August 1998 the Queensland Labor Government established an independent Taskforce comprising representatives from employers, unions, the then Department of Employment, Training and Industrial Relations, and two industrial relations experts to review industrial relations legislation in that state. The terms of reference for the review were to recommend legislation that was fair and balanced, improved the economy and provided jobs growth and job security {l!ldustrial Relations Taskforce, 1998: 7). The Taskforce undertook extensive public consultation that resulted in 200 submissions from a broad range of individuals and groups. Recommendations by the Taskforce were the basis for the new Act, with 150 of the 166 recommendations being adopted by the Government. The Industrial Relations Act 1999 (IR Act) came into effect on I July I999 and replaced both the Workplace Relations Act 1997 and the Industrial Organisations Act 1997 (Queensland Government, 200 I: I).

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Section 58(2) of the IR Act required a full bench of the Queensland Industrial Relations Commission (QIRC) to review the entitlement to LSL before 30 June 2000. The review resulted in a new entitlement to provide for long service leave of 8.6667 weeks leave after ten years of service instead of the previous entitlement of thirteen weeks after fifteen years service. These changes mean that Queensland workers are able to access their LSL five years earlier. Another key feature of the legislative changes was that under certain circumstances employees would have access to a proportionate payment ofLSL on t~rmination after seven years service, where previously workers only had access to a pro-rata payment on termination after ten years service. The changes to the LSL entitlement in Queensland covered all employees including casual employees, although casuals were subject to certain conditions (QIRC, 2000; Queensland Government, undated).

The issue of cashing out of some or all LSL was also considered by the Commission. While the Commission accepted that cashing out ofLSL was incompatible with the purpose for which it is granted, there had ~een 'no tales of horror' from jurisdictions where cashing out ofLSL was permitted. The Commission resolved that cashing out ofLSL should be permitted in the case of adult workers but not until ten years continuous service had been completed (QIRC, 2000: 14). An employee may make an agreement with their employer to receive payment for all or part of their LSL entitlement instead of taking the leave if permitted under their industrial instrument. If the employee is not covered by an industrial instrument the employee may make application to the Commission for an order to make such a payment. The Commission may make such an order only if satisfied that the payment should be made on compassionate grounds or on the ground of financial hardship (Queensland Government, undated: II).

On the matter of portable LSL being made available in some or all industries the Commission was divided, with two Commissioners reluctant to recommend the introduction of portability schemes. It was suggested that the trial of such a scheme for cleaners in the health industry in the ACT may provide the basis upon which the Queensland Government could subsequently act (QIRC, 2000). Portability ofLSL in Queensland exists only in the building and construction industry. ·

Conclusion: A Reinterpretation OfLSL For The 21st Century

LSL has come a long way in Australia since its development as a respite for colonial administrators in return for continuity of service. A more diverse range of employees in terms of occupation, industry, gender and hours of employment now have access to LSL. The relevance of LSL in terms of respite and continuity of service is under threat from proposals for the cashing out and for the portability of LSL provisions. On the other hand, the growth in average full-time hours of work extends the respite need of LSL for many full-time employees. Also, many workers are constrained in accessing LSL due to enforced career breaks, being employed in industries where employment engagements are oflimited duration and being employed in small enterprises with limited opportunity for career progression.

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Long Service Leave in Australia: Rationale, Application and Policy Issues 37

Important issues remain to be resolved including portability, pro-rata access and the protection of the LSL accrued benefit in the case of corporate failure. The nature of LSL does require re-examination. Should it be seen purely as a reward for service with a single employer, given the associated biases this entails, or should it be seen as a form of employment insurance that accrues through service? If this second interpretation is developed, it would allow for greater integration between LSL and family-friendly employment arrangements and would progress the position ofLSL in the case of corporate failure. Also, on this interpretation the portability and building up ofLSL credits would be part of any employment engagement. As other countries such as Canada and the USA have a social insurance component linked to employment service and salary, consideration is warranted for a re-examination of the rationale, application and access to LSL in Australia.

Acknowledgements

* A University ofNewcastle Research Management Committee Grant funded this research. The authors thank the editors and two referees for their assistance and advice.

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