Q. We have a long-serving, full-time employee who is employed in our Queensland office and who has requested long service leave. The employee has just completed 10 years of service with the company and wishes to take an extended holiday overseas with her family. The employee has requested four months leave indicating she would be happy to take the total period of leave on half pay. This would mean taking just over seventeen weeks of leave on half pay. While the immediate manager is agreeable to the employee’s request, our Head Office thinks the arrangement may contravene long service leave legislation. The employee is covered under the Clerks – Private Sector Award 2020. 

A.  In Queensland, long service leave is governed by the Industrial Relations Act 2016 (Qld).
Under the Act, long service leave must be paid at the employee’s ordinary rate of pay for their ordinary hours. After 10 years of service, a full-time employee is generally entitled to approximately 8.67 weeks of paid long service leave.

But can long service leave be taken at half pay? Queensland legislation does not expressly provide for long service leave to be taken at half pay. 

The key compliance position is the employee’s entitlement must be paid in full at the ordinary rate and employers should not simply convert the entitlement into a longer period at reduced pay. While an employer and employee may wish to agree to a “half‑pay” arrangement, such an approach is not clearly supported by the legislation, and may expose the employer to underpayment risk.

To accommodate extended leave requests while remaining compliant, employers should consider granting the employee’s full long service leave entitlement at ordinary pay, and
agreeing to additional leave, such as unpaid leave, or annual leave. This achieves a similar outcome without creating legal uncertainty.
  

Other states and territories

Victoria is a key exception.Under the Long Service Leave Act 2018 (Vic), an employer and employee may agree for long service leave to be taken over a longer period, and at a reduced rate of pay (e.g. half pay). An employer must grant a request from an employee if it is reasonable to do so having regard to the needs of the employee and the needs of the employer’s business. 

In most other jurisdictions legislation does not expressly permit half‑pay arrangements, therefore, the safer approach is to assume that long service leave should be taken at full pay, unless clearly allowed otherwise. 
 

What about annual leave on half-pay? 

Award/agreement-free employees 

In the case of award/agreement-free employees, r2.03 of the Fair Work Regulation 2009 provides that an employer and an award/agreement-free employee may agree to the provision of “extra annual leave in exchange for foregoing an equivalent amount of pay”. Such an arrangement may also be agreed upon between the employer and an award/agreement-free employee in the case of personal/carer’s leave. 
 

Award-covered employees 

In the case of award-covered employees, the Fair Work Act 2009 and the applicable modern award need to be considered. The Act (s90(1)) states that if an employee takes a period of paid annual leave, the employer must pay the employee at the employee’s base rate of pay for the employee’s ordinary hours of work in that period. This means that the employee is paid at their ordinary weekly hours for the period of annual leave, which would prohibit an arrangement whereby the employee takes extra leave on half-pay. In addition, the applicable modern award or enterprise agreement should be considered. 
 
While the Fair Work Act allows that terms relating to the taking of annual leave may be included in a modern award or an enterprise agreement (s93), the award or agreement must make specific provision to allow for such an arrangement. 
 

Enterprise agreements 

Taking an extended period of annual leave on half-pay would be a permissible term in a proposed enterprise agreement, which could be included in an enterprise agreement through the bargaining process. Otherwise, payment at half-pay would not be permitted under the applicable enterprise agreement. Reference should therefore be made to the applicable enterprise agreement to determine the legality of implementing such an arrangement. 
  

The bottom line

With the exception of Victoria, other state and territory legislation does not have a clear legislative basis for taking long service leave at half pay. The safest option is to combine paid long service leave, and additional unpaid or annual leave.