On 1 March 2026, NSW Industrial Relations (NSW IR) released a new Long Service Leave Guide (Guide) on how it intends to administer the Long Service Leave Act 1955 (NSW) (LSL Act).
While there has been no change to the underlying legislation, the Guide addresses several areas of the LSL Act that have not previously been the subject of detailed step-by-step guidance. Moreover, the Guide outlines some key changes in areas where detailed guidance has existed for some time.
Importantly, NSW IR has indicated that the views expressed in its new Guide will only be applied on a prospective basis, meaning it will not impact any prior enforcement activity.
Key items to note
The Guide contains some key changes in NSW IR’s approach, which, if followed, may require considerable amendments to existing payroll systems and processes for relevant employers.
The key changes to note include the following:
- Counting continuous service for casual employees: NSW IR now considers that each casual employee’s “pattern of work” should be individually assessed to determine whether gaps between shifts cause a break in continuous service. In NSW IR’s view, such an assessment should consider the regularity of shifts, the time between engagements, and the reasons for any interruptions. In practice, this would likely require a detailed analysis of a wide range of payroll and other records for each casual employee, which may prove a significant challenge for many employers.
- Calculating “ordinary pay”: The LSL Act requires different approaches to calculate ordinary pay depending on whether an employee has a fixed or variable rate of pay.1 Previously, NSW IR had published material suggesting that the variable rate method mainly applied to employees earning commissions and piece workers. Under its new Guide, NSW IR now considers that the variable rate method may apply to any employee who, at the time they are due to receive an LSL payment, is eligible to receive amounts in addition to a fixed rate of pay. This change has the potential to impact employees who may have otherwise been considered to have a fixed rate of pay, including salaried employees eligible for regular award “true-ups” or salaried employees eligible to participate in a bonus scheme.
- Treatment of bonuses: Following on from the above, where an employee’s mere participation in a bonus scheme requires their ordinary pay to be determined using the variable rate method, this would now require:
- An averaging of their ordinary remuneration over 12-month and five-year periods (where only the latter would previously have been required)2
- A separate averaging of their bonus receipts over a five-year period (where it would previously have been averaged over 12 months)3
- Caution must be now applied to avoid any double counting of bonus receipts across the two averaging calculations
- Approach to fluctuating hours: When an employee does not have a ‘normal weekly number of hours of work’, NSW IR considers that an additional calculation is needed before calculating their ordinary pay under either the fixed or variable pay method. The additional calculation—which is needed for both casual employees and part-time employees regularly working beyond their contracted hours—appears to be consistent with earlier updates to NSW IR’s published guidance. However, the new Guide steps through the expected approach in a more expansive manner with detailed formulas, which vary depending on remuneration type.
- No requirement for completed years after 15: Earlier published guidance suggested that an employee would only be entitled to accrue long service leave benefits for each ‘completed’ year of service after 15 years. NSW IR appears to have reversed its earlier position, where the Guide now suggests that all whole and part years of service beyond 15 years must be recognised.
The takeaways
NSW’s long service leave regime remains complex and nuanced, particularly regarding casual employees and those eligible to participate in bonus or incentive schemes. The new Guide outlines the need for highly fact-specific analyses and the use of prescriptive formulas that may, in practice, not provide for a clear and ready application to a particular employer’s arrangements and require a considerable reconfiguration of payroll systems to accommodate the intersection and hierarchy of the competing calculations suggested.
Importantly, whilst the Guide does not change the underlying law, it provides a clear indication of NSW IR’s views as the relevant regulator tasked with overseeing the LSL Act. With that in mind, HR and Payroll professionals should review the Guide in detail and complete the following priority tasks:
- Audit your workforce to determine the number of employees that would be impacted via the expanded variable pay calculations (e.g. those eligible to participate in a bonus or incentive scheme)
- Assess existing payroll system functionality, including the ability to perform 12-month and five-year averaging calculations and, when needed, a relevant ‘higher of’ determination without manual intervention
- Gauge the adequacy of current record-keeping for casual employees to assess whether a “pattern of work” analysis would be feasible in practice
Footnote:
1 See definition of “ordinary pay” in sections 3(1)(a) and 3(1)(b)
2 Section 3(1)(b)
3 Section 3(1)(c)
