Push for nationwide portable long service leave scheme

A public policy institute is calling for a national portable long service leave scheme, saying long service leave helps boost workplace productivity and remedy the increasingly prominent issue of workplace stress.

The report by the McKell Institute found approximately only one in four Australian workers are currently able to take long service leave, with this number set to worsen as the workplace continues to evolve.

McKell Institute executive director Peter Bentley told SmartCompany three quarters of Australian workers do not stay with their employer for more than 10 years, meaning they are ineligible to take long service leave and making workers more prone to burnout.

“This isn’t because of increased disloyalty, but essentially the changing dynamic of the Australian workforce has made this uniquely Australian entitlement to become effectively redundant,” he says.

Bentley says recent surveys have shown more than 50% of Australian workers would prefer an extra two weeks’ annual leave to a pay rise, sparking the institute’s push for a nationwide scheme.

“At a time when we’re seeing more and more workplace-related stress and mental health challenges, Australians are working some of the longest hours in the OECD.

“Here is an entitlement which isn’t being used as much as it should be, so it’s time to reinvent it and make it applicable to the majority of workers in today’s environment,” he says.

The report proposes three potential ways of making the scheme portable between employers, but Bentley says the purpose of the report is to encourage a nationwide debate around the issue.

“It’s a big new idea and this is why we’ve comprehensively detailed the proposal and a number of options for how it could be implemented. In terms of moving forward, we’re asking the business, political, trade union and civil leaders to engage with the concept and start a community debate about how this could be extended to a nationwide scheme,” he says.

The first proposition for portable long service leave is modelled on the superannuation system’s approved deposit funds (ADF) of the 1980s. In this scheme, employers would make their own internal provisions for long service leave until an employer leaves the company. When they leave, the employer would deposit the accrued amount as a lump sum into an ADF the employee nominates.

In the second version of the scheme, there would be the creation of industry-based defined benefit funds. These types of funds already exist in some industries, such as the mining sector, and employers pay benefits into these funds. Should it become a nationwide scheme, Bentley says if the employee was to change sectors the accrued money would be transferred to a different industry fund.

The third option is similar to the current superannuation model where employers would pay money on a regular basis into a designated long service leave account and these accounts would be administered by a superannuation fund or a financial institution.

Bentley says ensuring long service leave every 10 years would boost productivity in the workplace.

“One of the challenges in productivity is ensuring people are fit and healthy at work. Long service leave allows people to recharge batteries, spend time with their families to help them restore the work-life balance, boost domestic tourism and allow them to come back renewed and less stressed.

“For employers, these schemes mean even if the employee has only been working two or three years with the company, the employer will only have made a two or three year contribution to their long service leave fund,” he says.

The report states other advantages of a portable scheme include increased cost certainty for employers and going through an industry fund would remove administrative burdens on businesses.

Despite the advantages, some potential negatives of the schemes include the impact on business cashflows of prefunding long service leave and the financial cost of providing benefits to employees who leave after a short period of time.

Prior to this investigation by the McKell Institute, in 2010 Fair Work Australia recommended an investigation into a national long service leave scheme.