Under the WA Long Service Leave Act, an employee must be paid their ‘ordinary pay’ when taking long service leave or when receiving payment for long service leave.
What is ordinary pay?
Ordinary pay is payment for an employee’s ‘normal weekly number of hours of work’ calculated on their ordinary time rate of pay.
An employee's ordinary time rate of pay is the rate that applies to the employee when:
- they take a period of long service leave; or
- they receive payment for long service leave that is cashed out; or
- they receive payment for untaken long service leave when their employment ends.
Ordinary pay does not include shift premiums, overtime rates, penalty rates or allowances.
For a casual employee, ordinary pay does include their casual loading.
Ordinary pay also includes the cash value of any meals or accommodation normally provided to the employee, if the meals and accommodation is not provided to (and taken by) the employee during a period of long service leave.
Normal weekly number of hours
If an employee’s normal weekly number of hours of work have varied during a period of employment, the normal weekly number of hours is the average weekly hours worked by the employee during the period.
A period of employment means an accrual period. For example, the first 10 years of continuous employment is one accrual period and the next 5 years of continuous employment is a second accrual period.
For the purposes of averaging of hours, a period of employment does not mean the entire period an employee has been employed with an employer.
If an employee has more than one long service leave accrual period, normal weekly working hours are determined separately for each accrual period – see Calculating normal weekly hours where an employee has worked more than 10 years section below.
An employee’s normal weekly number of hours will include overtime hours if the employee regularly worked overtime during a period of employment.
Averaging the varying hours which may be worked by a casual or seasonal employee takes into account periods when their employer did not provide them with work. For more information, visit Long service leave for casual and seasonal employees.
For calculating normal weekly number of hours for FIFO employees refer to the Ordinary pay for a FIFO employee section below.
Absences not included when averaging weekly hours
Absences which are not counted when calculating the length of a full time or part time employee’s continuous employment (for example, a period of unpaid leave) are not included when averaging the employee’s hours.
Example
Permanent employee Ezra worked for the same employer for 10 years. Ezra took 12 months of unpaid parental leave during this time. Whilst this period of unpaid leave does not break Ezra’s period of continuous employment, it does not count towards the length of Ezra’s continuous employment.
On termination of employment, the length of Ezra’s period of continuous employment for the purposes of long service leave is therefore 9 years. He is entitled to pro rata long service leave on ordinary pay for this period. Ordinary pay is Ezra’s remuneration for his normal weekly number of hours calculated on his ordinary time rate of pay.
Ezra’s hours have also varied during this period. He worked 4 years on a full time basis at 38 hours per week and then 5 years on a part time basis at 30 hours per week.
As Ezra’s hours have varied, calculations to determine his normal weekly working hours are required. The averaging will not include the 12-month period during which Ezra was on unpaid leave and worked no hours. Therefore, the calculation will require averaging the hours Ezra worked over the 9-year period of continuous employment, not over the 10 year-period which has elapsed since he first started work.
Ezra’s normal weekly number of hours of work during the 9-year period of continuous employment were therefore 33.56 hours per week.
Payment in advance for long service leave
An employer is required to provide payment in advance for a period of long service leave if the employee requests pay in advance in writing, before the period of leave commences.
Superannuation and taxation
Visit the Australian Taxation Office website for information on tax and superannuation on long service leave.
Calculating normal weekly hours where an employee has worked more than 10 years
Show moreUnder the WA Long Service Leave Act, when an employee completes 10 years of continuous employment, they accrue an entitlement to 8.667 weeks of long service leave, and a further 4.333 weeks of long service leave for every 5 years of continuous employment after the initial 10 years.
An employee with more than 10 years of continuous employment may also be entitled to receive payment of pro rata long service leave when employment ends. The pro rata entitlement is calculated on completed years of employment only.
This means that if an employee has completed more than 10 years of continuous employment, there will be more than one accrual period for long service leave. These periods will be:
- the initial 10 years of continuous employment
- each subsequent 5-year period (or completed years of employment within a subsequent 5-year period, if calculating pro rata long service leave entitlements on termination).
If an employee’s hours have varied in one or more of their accrual periods and calculations to identify normal weekly working hours are required, any averaging of hours is based only on the hours worked in the relevant accrual period.
Some examples of calculations for employees with multiple accrual periods are provided below.
Example 1: Employee has completed more than 10 years of continuous employment and employment is ending.
Mike has worked for 18 years and 6 months for his employer. For the first 10 years, Mike worked full time at 38 hours per week. Mike then changed to casual and worked varying hours for the next 8 years and 6 months until his employment ended. Mike did not take any long service leave during his employment.
Accrual period 1 - 10 completed years of continuous employment
- An employee is entitled to 8.667 weeks of leave in respect of 10 completed years of continuous employment.
- As Mike’s weekly hours did not vary over accrual period 1 (the initial 10 years of continuous employment), averaging of hours is not required. Mike’s normal weekly number of hours of work for this period were therefore 38 hours per week.
- 8.667 weeks of leave x 38 normal weekly number of hours of work = 329.346 hours of long service leave entitlement for accrual period 1.
Accrual period 2 - next 5 completed years of continuous employment
- An employee is entitled to 4.333 weeks of leave in respect of each 5 years of continuous employment completed after 10 years of continuous employment.
- As Mike’s weekly hours varied during accrual period 2 (the next 5 years of continuous employment), averaging of Mike’s hours over the 5-year accrual period is required in order to determine his normal weekly number of hours of work. Mike worked an average of 20 hours per week over the 5-year accrual period.
- 4.333 weeks of leave x 20 normal weekly number of hours of work = 86.66 hours of long service leave entitlement for accrual period 2.
- Mike was entitled to 86.66 hours of leave for this period.
Accrual period 3 - next 3 years and 6 months of continuous employment (pro rata long service leave)
- An employee with at least 10 years of continuous employment on termination is only entitled to long service leave in respect of completed years of employment.
- Mike is therefore only entitled to long service leave in respect of 3 years of continuous employment, not 3.5 years of continuous employment.
- As Mike has 3 completed years of employment since last becoming entitled to long service leave (i.e. at 15 years), he is entitled to a proportionate amount of 8.667 weeks leave for those 3 years. This equals 2.6 weeks of leave (3 years/10 years x 8.667 weeks).
- Mike’s employee’s hours varied during the third accrual period (his final 3.5 years of employment).
- However, averaging of an employee’s hours (if required) only occurs over completed years of continuous employment. Averaging of Mike’s hours to determine his normal weekly number of hours of work therefore does not include the hours worked in his final 6 months of employment.
- Mike worked an average of 25 hours per week in his final 3 completed years of continuous employment.
- 2.6 weeks of leave [3 years/10 years x 8.667 weeks] x 25 normal weekly number of hours of work = 65 hours of long service leave entitlement for accrual period 3.
Mike’s total long service leave entitlement on termination
329.346 hours + 86.66 hours + 65 hours = 481.006 hours
Example 2: Employee has completed more than 10 years of continuous employment and is taking a period of long service leave.
Esther has worked for 16 years for her employer. For the first 4 years, Esther worked on a casual basis and worked varying hours each week. Esther then became a part time employee and worked 22.5 hours every week for the next 7 years. Esther then commenced working full time and has been working 38 hours per week for the last 5 years. Esther has not yet taken any long service leave during her employment.
Accrual period 1 - 10 completed years of continuous employment
- An employee is entitled to 8.667 weeks of leave in respect of 10 completed years of continuous employment.
- As Esther’s weekly hours varied over her first accrual period (the initial 10 years of continuous employment), averaging of her hours over the 10-year accrual period is required in order to determine her normal weekly number of hours of work. Esther worked an average of 26 hours per week over the 10-year accrual period.
- 8.667 weeks of leave x 26 normal weekly number of hours of work = 225.342 hours of long service leave entitlement for accrual period 1.
Accrual period 2 - next 5 completed years of continuous employment
- An employee is entitled to 4.333 weeks of leave in respect of each 5 years of continuous employment completed after 10 years of continuous employment.
- As Esther’s weekly hours varied during the second accrual period (the next 5 years of continuous employment), averaging of her hours over the 5-year accrual period is required in order to determine her normal weekly number of hours of work. Esther worked an average of 34.9 hours per week over the 5-year accrual period.
- 4.333 weeks of leave x 34.9 normal weekly number of hours of work = 151.222 hours of long service leave entitlement for accrual period 2.
- Esther was entitled to 151.222 hours of leave for this period.
Next 1 year period
- An employee is only entitled to take long service leave in respect of completed accrual periods, that is, the initial 10 years of continuous employment, and each subsequent completed 5-year period.
- Esther is therefore only entitled to take long service leave which has accrued in her first 15 years of continuous employment.
- Hours worked by Esther during this period are not relevant to the calculations done for each of her first two accrual periods.
Esther’s total amount of long service leave available to take
Esther has a total of 376.564 hours (225.342 hours + 151.222 hours) which she can take.
Ordinary pay for an employee paid by piece rates or commission
Show moreOrdinary pay for an employee who is employed on a system of payment by results (e.g. piece rates, commission, bonus work, etc.) is the average weekly rate earned by the employee during the previous 365 days ending on:
- the day immediately before the day on which the employee commences long service leave; or
- the day immediately before the day on which the employee and the employer reach agreement on payment instead of long service leave; or
- the day immediately before the day on which the employee was last in employment (if the employee is no longer employed).
Any periods of unpaid leave and stand down are excluded from the 365 day period. This ensures that employees are not disadvantaged if, for example, they have taken a period of unpaid leave - such as unpaid parental leave. However, any periods of paid leave are included in the calculation.
The average weekly rate for an employee who is paid a base rate and a commission/bonus is based on both the ordinary time rate of pay and the amount of the commission/bonus earned during the previous 365 day period.
To calculate the average weekly rate, the employee’s earnings, including any base salary plus bonuses, are totalled over the previous 365 days (excluding any periods of unpaid leave). This figure is then divided by 365 and multiplied by 7.
The average weekly rate method is only applicable where an employee is regularly paid an amount wholly or partly based on results, and this forms an integral part of their payment system. For example, this method would not apply if an employee received occasional or irregular bonus payments at the employer’s discretion.
In order to calculate long service leave entitlements, keeping employment records is very important.
Example 1 - Calculating ordinary pay
Alex is paid wholly by commission. Alex took six months’ unpaid parental leave from 1 April to 30 September 2022 and she wants to take long service leave from 1 January 2023. Her ordinary pay for this period of leave is calculated over a period totalling 365 days ending on the day immediately before the day on which her leave commences (i.e. 31 December 2022).
Calculating Alex’s ordinary pay requires averaging the commission she earned in the 273 days prior to 1 April 2022 and in the 92 days from when she returned to work between 1 October 2022 and 31 December 2022 (i.e. a total of 365 days excluding the period 1 April to 30 September 2022 when Alex was on unpaid leave).
Example 2 - Calculating payment when employment ends
Harley has resigned after working for a business for 8 years. Harley’s employer has used the WA long service leave calculator to estimate Harley’s pro rata long service leave entitlement, which equates to 6.94 weeks. Harley is paid a base salary plus commission, meaning Harley’s ordinary pay for this period is calculated over a period totalling 365 days ending on the day immediately before Harley’s last day of employment. Harley has not taken any unpaid leave during the last 365 days.
To calculate Harley’s average weekly earnings, Harley’s employer calculates the total amount of salary and commission earnt by Harley over the previous 365 days (in this case $100,000) and then divides this amount by 365 and multiplies it by 7 (e.g. $100,000 / 365 * 7 = $1,917.81).
To calculate Harley’s pro rata long service leave payment on termination, Harley’s employer multiplies Harley’s average weekly earnings by Harley’s pro rata long service leave entitlement (e.g. $1,917.81 * 6.94 weeks = $13,309.60).
Ordinary pay for a FIFO employee
Show moreThe average weekly number of hours for a FIFO employee will include both ‘on weeks’ and ‘off weeks’.
For example, if a FIFO employee works a 2 week on and 1 week off roster and works 77 hours per week when they are rostered on, their average hours worked over the 3 week cycle would be 51.33 hours per week (154 hours / 3 weeks).
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