Long service leave, the labour market, and portability of entitlements.

Author:Thornthwaite, Louise
Position:Contributed Article - Report


In this article we examine the case for the portability of long service leave (LSL) entitlements. Proliferating fexibility in employment arrangements increasingly leaves workers without coverage of employment provisions based on tenure with a single employer. An historical analysis of developments in LSL in Australia, including implementation of portable schemes in particular industries, and an analysis of labour-market trends are undertaken. We argue that the restriction of LSL to long-term employment with a single employer is anachronistic in the modern labour market. Nevertheless, LSL remains an important entitlement in the context of the contemporary labour market--perhaps more so than previously--even if the arguments in support of LSL have generally shifted in emphasis as a result of changes in the labour market. We conclude that a general entitlement to portable leave would deal with current inequities with respect to access to LSL. It would particularly assist in reconciling employers' demands for fexibility with employees' demands for protection.

  1. Introduction

    Statutory LSL entitlements in Australia enable employees who have completed an extended period of employment to take a period of paid leave. Typically, although not always, employees are eligible for three months leave after 10 years service with one employer. In a few industries, accrued leave is portable between employers and jobs, and is based on length of employment within the industry. Most portable schemes allow for accrued LSL entitlements to survive breaks in service under certain conditions. In portable schemes, the leave is commonly financed through employer levies which are invested by publicly constituted boards. However, a growing proportion of the workforce is missing out on LSL. This is principally because while most entitlements are confined to those in a traditional employment relationship, working arrangements have become increasingly flexible and diverse in nature.

    LSL is an employment entitlement unique to Australia. However, provisions based on length of service also feature in other countries. For example, in Japan, Austria, Finland, Greece, and Canada annual leave entitlements rise with a worker's seniority (Ray and Schmitt 2007, p. 5). In New Zealand, some employment contracts provide for LSL (Labour Ministers Council 1999). Perhaps the provision most comparable to Australia's system is the statutory provision of Job Alternation Leave introduced in 1996 in Finland and jointly funded by state and unemployment insurance funds (Eurofound 2014).

    Burgess et al. (2002, p. 35) called for a re-examination of the rationale, application, and accessibility of LSL in Australia. Since then, with flexibility proliferating in employment arrangements and associated workforce access to LSL declining, several governments have extended the provision for portable LSL to certain industries. The Fair Work Act 2009 included LSL as a National Employment Standard, preserving existing employees' rights as a transitional entitlement pending the development of a uniform national standard. The Fair Work Review subsequently proposed a national streamlining of the LSL standard by 2015 (Fair Work Act Review 2012). While the necessary legislation would involve complex political processes, it is clear that portable LSL offers an effective means for achieving the ambition of the Fair Work Act.

    In this article we argue that the restriction of LSL entitlements to tenure with a single employer is anachronistic in the modern labour market, and that all Australian employees should be entitled to portable LSL based on length of employment. We begin by analysing the origins and development of statutory LSL in Australia and the types of portable schemes already in operation. In Section 3 we discuss the coverage of LSL and its relationship with contemporary patterns of employment. In Section 4 we consider the case for portability of LSL in the light of policy arguments used for its provision and the 'flexicurity' concept. Drawing on the flexicurity discourse in Europe, our conclusion is that portable LSL might facilitate further flexibility for employers in their pursuit of increased productivity and competitiveness by enhancing the security of workers.

  2. The Evolution of Long Service Leave in Australia

    The employee entitlement to LSL has its roots in Australia's colonial history. From the 1860s, the colonies legislated for extended leave in their Civil Service Acts. At a time when it could take three to six months to travel to Europe, this gave government employees an opportunity to visit their home country. Thus, under An Act to Regulate the Civil Service of Victoria (1862), the Governor in Council could grant up to 12 months leave on half salary:

    where any officer desires to visit Europe or some other distant country if he have [sic] continued in the Civil Service of this colony at least ten years and have [sic] not been reduced for misconduct or deprived of leave of absence under this Act ... but for such period of absence the officer shall not be entitled to received [sic] any award increment (s. 37). In the following year, Queensland's Civil Service Act 1863 granted that colony's civil servants the same entitlement (s. 16).

    By the 1870s, colonial populations had changed somewhat. Fewer government employees had relatives whom they still sought to visit regularly in distant places. The 1873 Royal Commission on Victoria's Civil Service noted that the extended leave provision 'was made with special regard to those persons who had relatives in the mother country', and examined the implications of this demographic change. Witnesses to the Commission asked that in lieu of 12 months leave to travel overseas, six months fully paid leave should be granted, 'which the applicant should be at liberty to enjoy in anyway and in any locality he might fix upon' (Victorian Government, 1873, clause 69). Largely accepting this suggestion, the Commission recommended legislation to provide civil servants with six months fully paid leave 'for the sole purpose of recreation' after 15 years service (rather than the previous 10) and a further six months unpaid on request (Victorian Government 1873, clause 69). In 1874, the Victorian Government legislated for up to 12 months LSL on half salary or six months on full salary after 10 years (rather than 15) continuous service, and after 20 years, 12 months leave on full salary (Civil Service Act, 1874, (Victoriae) 37 & 38, No. 3). In 1890, in more straightened economic circumstances, the Victorian Government raised the qualifying period from 10 to 20 years (Public Service Act 1890, (Vic.) 54 No. 1133, s. 134).

    By Federation, most colonial civil servants were entitled to LSL similar to that in Victoria, although qualifying periods varied. In New South Wales, for instance, the extended leave was essentially half that offered in Victoria. That is, after 10 years a civil servant was entitled to only three months leave on full salary, with six months available on half salary; 20 years service qualified employees to 12 months on half salary or six months fully pa id (Civil Service Act (No. 2) 1884 (Vic.) 48, No. 24, s. 40). Perhaps the most generous provision was in South Australia where public servants could take four months fully paid leave or eight months on half pay after 10 years continuous service, and after 20 years service, eight months on full salary (South Australian Government 1900).

    From 1942, federal and state industrial tribunals and wages boards began awarding LSL entitlements to particular workforce groups inside and outside the public service, such as the gas industry in 1942, fire brigade in 1945, undertakers in 1948, and flour millers in 1950. Each scheme was based on continuous service with a single employer. In 1951, the NSW Government amended the Industrial Arbitration Act 1940 (NSW) to require industrial tribunals to insert LSL clauses in State Awards or industrial agreements. The Queensland government enacted similar provisions in 1952. The first jurisdiction to impose a direct statutory obligation to provide LSL independent of industrial awards, however, was Victoria in 1953. This triggered a snowball effect, with New South Wales and Queensland following in 1955, Tasmania in 1956, South Australia in 1957, and Western Australia in 1958 (Handley and Watson 1960, pp. 260-262). In all these cases, the statutory entitlement was based on 20 years service with one employer, except in South Australia which legislated a minimum period of seven years employment with the same employer. Since then, the minimum qualifying period of service has declined in most jurisdictions from 20 to 15 years, and then to 10 years (Selby 1983).

    The passage of these state-wide LSL statutes in the 1950s was not marked by significant debate about either the reasons for LSL itself or its extension throughout the workforce, or extension to at least the full-time permanent workforce. Indeed, scholars have observed that the reason for this spread into the private sector remains unclear. Burgess et al. (2002, p. 22) argue that as the 1950s was a period of labour shortage, 'it may have made sense to employers who wished to secure and reward long-term job attachment'.

    Certainly, in both Victoria's upper and lower houses of parliament, members voiced general acceptance concerning LSL as a 'reward for long service', an entitlement to 'rest', after 'playing the game' for a long, continuous period (Fraser 1952-1953). Parliamentarians referred to employees' needs for respite after extended periods of work to recover spent energies, and return to work renewed, refreshed, and reinvigorated. They also noted the value of rewarding long and faithful service with a single employer in reducing labour turnover (see for instance, Fraser 1952-1953, vol. 24, pp. 981-991). Equity grounds also provided justification: given the rapid profusion of LSL...

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