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With workforce mobility on the rise, employers need to understand how Portable Long Service Leave (PLSL) schemes affect their obligations, costs, and reporting requirements.
Australian employees increasingly expect mobility and flexibility in work as the norm. To meet these changing expectations, traditional employment benefits are changing to meet the needs of modern industries. One such change is the shift from regular long service leave entitlements to a range of PLSL schemes across the country. PLSL ensures that employees in high-turnover sectors receive long service leave entitlements, correcting a long-standing disadvantage.
This article focuses on the Victorian PLSL scheme, outlining what your organisation needs to know to remain compliant and manage financial risk.
While this article focuses on Victoria, similar schemes exist in other states and territories. Employers operating nationally should review requirements in each jurisdiction.
What is Portable Long Service Leave?
PLSL schemes allow eligible employees to accrue long service leave entitlements even if they change employers, provided they remain within the same industry. This is particularly relevant in sectors where employment is often project-based, casual, or short-term.
Traditional long service leave models require employees to stay with one employer for 7 to 15 years (depending on the award) before they can access long service leave. However, this approach disadvantages employees in industries where they often change employers. PLSL addresses this issue by allowing employees to accumulate service across multiple employers, ensuring they receive fair recognition for their long-term contributions to the industry, not just to a single organisation.
Once your employees meet the eligibility criteria, they can access long service leave, even if their service spans multiple employers.
Which employees and industries are covered by Victoria’s PLSL legislation?
In Victoria, the Portable Long Service Authority (PLSA) administers the PLSL scheme under state-specific legislation. The PLSL scheme currently covers three key industries:
- Community services
- Contract cleaning
- Security
Employees can check their registration status and participation through the PLSA website.
How does PLSL impact employers?
While PLSL schemes are great for employees, often they give rise to challenges for employers in the affected sectors. Some of these include:
- Upfront levy costs which have a quarterly cash flow impact.
- Additional administration requirements.
- Increased complexity surrounding estimates and judgements when determining the correct accounting treatment.
Once you have determined which employees are covered, it’s important to understand the accounting and compliance implications for your business.
Key accounting implications of PLSL schemes for employers
Accounting for portable long service leave can be complex. Management may need to exercise significant judgement and consider several factors when accounting for portable long service leave obligations. Each PLSL scheme’s distinct features and requirements determine how it is accounted for under Australian Accounting Standards. Ultimately, the accounting treatment depends on whether the organisation pays the entitlement or the PLSL scheme pays it directly.
A step-by-step guide to managing your PLSL obligations:
Step 1:
Ensure your employees are eligible.
Employers are responsible for ensuring that their organisation is registered with the PLSL scheme and that all eligible employees are also registered.
For your employees to qualify for PLSL in Victoria, you must:
- Employ them in a covered industry.
- Ensure they perform eligible work as defined by the PLSL scheme.
- Register them with the PLSA.
- Ensure your organisation is registered with the PLSL scheme.
Step 2:
Levy payments to the PLSA
Employers must submit a quarterly return and pay the corresponding levy to the PLSA. The PLSA will issue an invoice after processing your return. These payments should be expensed as incurred.
- DR Portable long service leave expense
- CR Cash
Step 3:
Calculate provision for long service leave
If your organisation is responsible for providing long service leave, you must recognise the full provision in accordance with AASB 119, even if you participate in the PLSL scheme.
- DR Long service leave expense
- CR Provision for long service leave
AASB 119 requires employers to recognise employee benefit provisions on a gross basis. That is, without the offsetting of anticipated recoveries from the PLSA.
Step 4:
Calculating receivable from the PLSA
If you expect reimbursement from the PLSA when an employee takes long service leave, you should record a receivable, provided the right to reimbursement is legally enforceable, probable, and measurable.
- DR Receivable from PLSA
- CR Long service leave expense
Employers may claim reimbursement under:
- The Long Service Leave Act 2018 (Vic).
- A contract of employment.
- A fair work instrument (e.g., awards, enterprise agreements).
To calculate the receivable amount recognised on the balance sheet employers should:
- Estimate the total long service leave entitlement.
- Determine the portion covered by the PLSL scheme.
- Discount the calculation back to net present value.
Employers should carefully calculate the receivable, as most schemes reimburse only base award wages. Other common exclusions include:
- Superannuation.
- Above-award payments.
- Service periods before the PLSL scheme’s commencement.
As a result, there may be instances where the amount an employer is able to claim is less than the amount actually paid to the employee.
Reimbursement percentage formula
Expected reimbursement % = (reimbursable amount / total LSL entitlement) × 100
Final thoughts
PLSL is a progressive step toward fairer employment practices in industries where long-term tenure with a single employer is rare. While great for employees, for employers, understanding the operational and accounting implications is essential, not only for compliance but also for effective workforce planning and financial reporting.
As this article refers to the Victorian model, please review the accounting methodology for each State and Territory in detail to ensure that the correct model is applied.
FOR MORE INFORMATION
If you would like to know more about PLSL, please contact your local RSM office.
