Workers in the contract cleaning, security and community services sectors in Victoria are now able to access long service entitlements, even if their employer changes.

The Long Service Benefits Portability Act 2018 (“Portability Act”) took effect from 1st July 2019 for employees in certain qualifying roles within the Security, Contract Cleaning, Community Services Industries.

About this Act

Who is impacted?

Persons who work in sectors where contract-work is the norm have traditionally struggled to access Long Service Leave under Long Service Leave Acts, including the former Long Service Leave Act 1992, and the new Long Service Leave Act 2018 (“LSL Act”).

The Portability Act aims to address the structural barriers to access to long service leave entitlements, across three industries:

  • Security,
  • Contract Cleaning, and
  • Community Services.

Both businesses which operate in the impacted sectors, as well as businesses that employ workers who perform work covered by the Portability Act, are impacted by the scheme.

What does it mean?

The Portable Long Service Benefits Authority (Authority) has been established to implement and administrate the Portability Act.

asset_24.pngBetween 1st July 2019 and 30 September 2019, impacted employers (including those operating in the industry, and those who employ workers who perform work covered by the Act) must have registered their workers nto the scheme through an online portal. This may include workers who are currently entitled to Long Service Leave under an award or the LSL Act.

Each quarter, employers have to submit a return online to the Authority, which includes details of all of the workers who are in roles defined in the Act who have worked in the business for that quarter (whether casual, full time, part time, or contractors), including their ordinary work hours and ordinary pay for the period.

To fund the scheme, an Employer Levy is charged. This is calculated as a proportion of the ordinary wages worked by qualifying workers in that quarter. They are currently set at the following levels:

  • 1.65% for community services
  • 1.80% for contract cleaning
  • 1.80% for security

The Authority will raise an invoice to the employer after receiving their quarterly submission, and this invoice will be payable via BPAY.

What happens when a qualifying worker wishes to take leave?

When the required time has been worked – this is usually seven years – the worker will have to request the time away from work from their employer, and the employer will approach the authority to receive the funds as reimbursement.

Under the scheme rules, in the contract cleaning and security industries, there is the option for workers to put in a request for recognition of prior service for the financial years 2018 and 2019. This option does not exist for community services workers.

Sample scenarios

A worker who is part of an award or EBA at 30 June 2019, and moves employer within the industry at the end of 2020

Consider the following scenario:4.png

  • Jack is a qualifying worker in the contract cleaning industry is part of an EBA in the year end 2019.
  • At that date, Jack has accrued five years of service under the EBA, while working for CleaningCo Ltd.

On 1st July 2019, Jack ceases to be part of that EBA, and moves onto the portability scheme.

  • At the end of 2020, with six years of service, Jack leaves their position with their employer CleaningCo, and moves to work for a new employer in the same industry – ShinyCo Ltd.
  • By moving employer, Jack  relinquishes their right to the five years’ worth of Long Service Leave that they had accrued under the EBA .

Because Jack is in the contract cleaning industry, they could apply to the authority for recognition of their service performed in the year end 2019 as qualifying service.  At 1 July 2020, Jack commences employment with ShinyCo Ltd with two years of qualifying service accrued – the year to 2020 plus the additional year of “qualifying service” – both claimable from the authority after a further five years of employment.

Accounting treatment

At 30 June 2019: there will remain a provision for long service leave for this employee under the EBA. This will remain in place until the employee resigns from this employment.

From 1 July 2019: the accrual under the portable scheme is treated as a payable invoice, to recognise the accrual of the amounts due to the authority, and the payment to the authority.

A worker who is part of an award or EBA at 30 June 2019 , and continues working for the same employer

Consider the alternative scenario where instead of moving employers, Jack continues working for CleaningCo Ltd for two further years after 1 July 2019:

  • Jack is a qualifying worker in the contract cleaning industry is part of an EBA in the year end 2019.basic_illustrations-42-data_security - Copy.png
  • At that date, Jack has accrued five years of service under the EBA, while working for CleaningCo Ltd.
  • On 1st July 2019, Jack ceases to be part of that EBA, and moves onto the portability scheme.
  • After 30 June 2021, Jack has accumulated a total of seven years of service working in the industry, for CleaningCo Ltd:
    • five under the EBA
    • two under the new scheme

Jack decides to take their leave soon after it is accrued.

Their employer will pay the leave relating to five years of accrued LSL under the EBA under the LSL Act, and the remaining two years’ worth of accrued leave will be paid from the Authority from the levy.  As it is a reimbursement scheme, the employer will pay upfront, and reclaim the relevant component from the Authority.

Accounting treatment

At 30 June 2019: there will remain a provision for long service leave for this employee under the EBA. This will remain in place until the employee requests long service leave.

From 1 July 2019: the accrual under the portable scheme is treated as a payable invoice, to recognise the accrual of the amounts due to the authority, and the payment to the authority.

Double entries required when Jack takes leave:

 DR

Provision for LSL

 DR

Receivable from Authority

                CR

Cash

 

Double entries required when CleaningCo receives the  reimbursement from the authority:

 DR

Cash

                CR

Receivable from Authority

 

Workers who have never been part of an EBA or award

asset_47.pngJane has never been entitled to accrue Long Service Leave under the LSL Act, because of the nature of her contracts. From 1 July 2019, Jane begins qualifying for accruing years of service under the Portability Act.

As Jane does not work in the community services sector, she is able to make a claim for recognition for prior service for services rendered in the year end 2019. This amount would be payable from the Authority.

Accounting treatment

At 30 June 2019: No accrual will be recognised for LSL from Jane’s services with any employer.

From 1 July 2019: the accrual under the portable scheme is treated as a payable invoice, to recognise the accrual of the amounts due to the authority, and the payment to the authority.

From 1 January 2020, additional community services roles will be included in the Scheme as detailed here. For more information, please visit Business Victoria

If you have any questions regarding the Long Service Leav Portability Act contact your local RSM office.