Long-service leave: use it to your advantage

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While long-service leave is a statutory employee benefit provided to loyal, long-serving employees, many companies do very little to promote it because of the high cost and perceived inconvenience of extended leave. In turn, employees are often hesitant to redeem their leave entitlement once they qualify.

Recently the calls for extending the sectors which permit portable long-service leave have grown louder – and last week a bill was introduced into the Legislative Assembly which if successful would see security workers join construction and cleaning workers as the only sectors with portable long-service-leave schemes.

Long-service leave can often actually be a large cost component on a company’s financial accounts, so it is important to more accurately value the liability, and strategically manage long-service leave to get the best value from it. The value of long-service leave to employees can be improved by including relevant information in new employee packs, and by including information in communications such as regular staff updates, training sessions and annual performance reviews.

Accurate valuation on financial accounts

Companies are required to set aside money in their financial accounts to pay staff their long service leave entitlements, which are seen as a cost of employment. There are many factors that can affect the cost of long-service leave, including:

  • salary increases – long-service leave cost increases when an employee’s salary increases
     
  • remuneration packaging – an increase in salary for long-service leave entitlements can mean a significant increase in costs for the company if employees are permitted to alter their remuneration packaging

Note also that some employees will be entitled to long-service leave upon being made redundant, yet they wouldn’t if they voluntarily left. Strategically managing this area can also have a definite impact.

Taking these factors into account and putting a more accurate value on long-service leave as a financial liability should be a business priority.

Strategic approach

One approach is to see the cost of long-service leave as the lesser of two evils: should the employee have left before the 10 years was up, you would probably have suffered recruitment and retraining costs much higher than the two months of paid leave the employee gets for long-service leave.

If this approach is taken, paying out long-service leave becomes a good thing rather than a bad thing.

Internally publicising the fact that someone’s long-service leave is due may yield real benefits in terms of the perception of the organisation as a good place to work and somewhere that rewards loyalty and provides a long-term career path. The work/life balance aspects of the long-service leave can also be emphasised.

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