This article was originally published 15 July 2020 and was updated 09 November 2020.
Portable Long Service Leave (PLSL) extension will commence on 1 January 2021
When does portable long service apply?
The start date for employees accruing service entitlements is 1 January 2021, with no recognition of service prior to this date. As a result, employees will be unable to claim PLSL within the scheme’s first seven years. Employer contributions must be lodged and paid quarterly.
For secondments to Queensland
If the period of work in Queensland exceeds five working days, the employer must pay the levy on the employee’s wages. This applies whether or not the secondee will accrue sufficient service entitlements to claim PLSL.
For secondments of an employee outside of Queensland
The employee will pause any accrual of service time and the employer will not be required to pay the levy. A similar situation applies if the employee remains in Queensland, but is no longer employed in a qualifying community service role.
If the employee does not return to Queensland or to a qualifying community service role within four years, their accrued service entitlements for the purposes of the PLSL are lost. However, the employer will continue to be liable to accrue long service leave (LSL) for those employees under the industrial relations legislation. No refund of the levies paid under the scheme are available to the employer.
Comparison to other PLSL schemes
PLSL schemes are in place in the Australian Capital Territory (ACT) (from 1 July 2020), and Victoria (1 July 2019). The interstate service of community service sector workers in the ACT and Victoria will add to service credits accumulated within the Queensland scheme.
However the definition of community services differs significantly between the three jurisdictions and the implications of interstate service will require careful analysis particularly by employers.
On 17 June 2020, the Queensland State Parliament passed the bill extending Portable Long Service Leave (PLSL) to the community services sector.
Additional operational components of the scheme will be contained in the regulations that are yet to be released, together with implementation policies that will be developed by QLeave.
The format of the community service’s PLSL has significant differences to the PLSL schemes for the building and construction and contract cleaning industries.
What is portable long service leave?
Traditional long service leave (LSL) arises when an individual employee works for a single employer for a period of 15 years thereby becoming entitled to paid long service leave of 13 weeks. A pro rata entitlement applies after 10 years’ service.
The concept of PLSL is that an industry or sector replaces the single employer, meaning an individual who works within a designated industry or sector for the fifteen years is entitled to LSL. Pro rata service rules apply. Employers commit a contribution to a statutory body, in this instance QLeave, based on the period of time that the individual is employed by their entity.
If an employee has worked with the one employer for ten or more years then the employee will most likely claim their LSL entitlements from their employer. The employer will therefore lodge a claim with QLeave for reimbursement to the extent that levies have been contributed to QLeave.
If an employee works within the community services sector in Queensland for more than 10 years, but for multiple employers in that time, the employee will claim their LSL entitlement directly from QLeave rather than their current employer. This generally will not occur within the first 7 years of the scheme as the scheme only takes into consideration an employee’s service in the sector from the start date of the scheme.
The community services scheme’s key aspects
Key aspects as presently contained in the scheme include:
- Applies to most employers and employees in the community services sector, private and not-for-profit (NFP), but excludes government employers and employees
- Will be administered by QLeave, the entity that currently manages the PLSL schemes for the building and construction industry and the contract cleaning industry
- Start date to pay the contribution levy is 1 January 2021 with the first levy payment due to be made by 14 April 2021
- Employees can only claim LSL from the scheme for service after the start date
- The levy is expected to be set at 1.35% (13 weeks after 15 years equates to 1.6667%)
- Employers do not receive a refund for employees who leaves the sector without becoming entitled to LSL
- LSL is payable to the employee sooner under this scheme – 6.1 weeks after 7 years (still based on 13 weeks entitlement for 15 year service)
- LSL entitlement is paid based on the wages/salary at the date of taking the LSL, with a reconciliation cap tied to the wages paid as contributions.
It should be noted that the scheme does not remove the responsibility/liability of the employer to pay LSL. Employers who pay LSL to employees should be entitled to claim back some funds from the scheme.
Definition of the sector
Section 6 –of the legislation sets out the community services industry as the industry in which entities provide community services in Queensland.
Further to this, section 7 defines community services work to include providing community services or supporting the provision of community services.
Community Services is defined in schedule 1 of the legislation to include:
- Aboriginal and Torres Strait Islander community services
- Accommodation support services
- Advocacy services
- Alcohol and other drug support services
- Child safety and support
- Community development services
- Community education services
- Community legal services
- Counselling services
- Disability emergency response services
- Disability support services
- Employment services
- Family and domestic violence services
- Financial counselling services
- Foster care and out-of-home care services
- Home and community care services
- Homelessness support services
- Lesbian, gay, bisexual, transgender, intersex or queer services
- Mental health services
- Migrant and multicultural support services
- Offenders transitioning services
- Respite services
- Seniors community support services
- Social housing services
- Violence prevention services
- Women’s services
- Youth justice services
- Youth support services.
The above list is based on a schedule developed in a 2016 Report by Deloitte Access Economics ‘Forecasting the future: Community services in Queensland 2025’1 commissioned by the then Department of Communities, Child Safety and Disability Services and the Community Services Industry Alliance on the sector, however there are no further definitions of what is included under the various categories.
Services stated as being excluded from the scheme include general health services, childcare and aged care.
There are four categories of employer under the legislation:
- An entity established for/with the purposes (including the provision) of community services that engages an individual
- A self-employed individual who provides community services
- A provider of labour hire services* that supplies an entity in (a) or (b) with an individual to perform community services work for the entity
- An entity prescribed by regulation.
Excluded employers include Commonwealth, State and Local Government organisations and any entity prescribed by regulation.
The levy is payable on the ordinary wages paid to employees. This consists of gross wages, any penalty rates, allowances (except for expenses incurred for use of equipment or motor vehicles), and deductions from gross wages.
For employers and employees with salary sacrifice arrangements, including fringe benefits tax (FBT) exempt salary packaging, in place:
- The employer payment is based on the gross salary before any salary sacrifice
- The payment to the employee will be based on the gross salary or will need to be made to the employer if salary sacrifice is to be applied during the period when the LSL is being taken.
An employer other than a self-employed individual who provides community services, must apply for registration within 28 days after becoming an employer, or face a maximum penalty of 40 penalty units (approximately $5,338). Employers are then required to lodge a quarterly return and payment of the levy to QLeave within 14 days of the end of each quarter. Employers must also maintain a record for all workers for six years, which includes:
- Personal details of the workers
- Worker registration number
- Date of commencement and cessation of employment
- Wages paid and leave taken.
Referred to in the legislation as a worker, an employee is an individual who is:
- Engaged by an employer to perform community services work
- Self-employed and performing community services work.
Importantly, this has broad application and is designed to capture all full-time, part time, and casual staff as well as individuals engaged under a contract for service. Employees are required to be registered either by applying themselves, or by information supplied by an employer.
If a worker leaves the Queensland community services sector, there is a four year period during which their service credits remain active. This period is extended if a worker has had service in the community services sector registered under a corresponding law (currently only applicable to service in the ACT and Victoria). Otherwise, after that four year period has passed, their service credits will expire.
LSL entitlements from the scheme are based on the wages at the time of commencing the LSL subject to a reconciliation based on the actual wages paid during the period of accumulation of the service.
Impacts for organisations
BDO considers the main outcomes for organisations are as follows:
- Organisations need to determine whether they are operating in the community services sector and, therefore, whether registration and payment of the levy as an employer is required
- Entities not directly involved in the community services sector may also be impacted, particularly labour hire entities
- Organisations must ensure all employees who are subject to the scheme are included – both direct front line and those supporting the service delivery
- Organisations must pay the levy on the correct amount of wages
- Interstate organisations with employees in the Queensland sector will be required to register and pay the levy on the Queensland employees. The Office of Industrial Relations (OIR) is still defining what registration requirements will apply. The OIR suggests it will likely recognise branches that have separate ABNs, however, how this works with large organisations will be a work in progress
- Organisations must pay the levy on services by all employees from day one of their employment
- There is a concern that employers may inadvertently be required to pay long service leave twice – once in the form of the levy and then at a later date to satisfy their liability as an employer
- This could arise where an employee remains with the employer but is transferred interstate to a jurisdiction without a corresponding scheme or to a related business unit that is outside the community services sector.
It is vital that employers who may be impacted by the scheme understand its mechanics and their reporting obligations, to minimise the risk of penalties applying.
Keeping you informed
BDO is monitoring the development of the detailed rules to determine how the legislation will impact entities and individuals operating in Queensland.
Should you have any queries or concerns related to the extension of PLSL to the community services sector, please contact us.
1 Forecasting the future: community services in Queensland 2025
Visit QLeave Community Services for more information.