Long Service Leave in Victoria: What Manufacturers Must Provide

Who this applies to

If you run a manufacturing site in Victoria and employ staff directly — floor workers, maintenance techs, supervisors, office staff — the Long Service Leave Act 2018 (Vic) almost certainly applies to them. The Act covers full-time, part-time, casual, seasonal and fixed-term employees, and apprentices and trainees. Genuine independent contractors are excluded, but that's assessed on the substance of the relationship, not the label on the invoice.

Two carve-outs matter for manufacturers specifically. First, if a federal modern award or an enterprise agreement already deals with long service leave, that instrument generally governs instead — though modern awards made since 1 January 2010 are not permitted to include LSL terms, so in practice most award-covered manufacturing employees fall back to the Act. Second, workers with a portable LSL scheme under a different Act (for example, construction workers under the Construction Industry Long Service Leave Act 1997 (Vic), or some contract cleaning and security roles under the Long Service Benefits Portability Act 2018 (Vic)) are carved out of this Act to the extent of any inconsistency. A standard manufacturing production or warehouse role doesn't fall into either portable scheme.

When the entitlement accrues — and when it becomes payable

Long service leave accrues progressively from day one of employment, at a rate of one week of leave for every 60 weeks of continuous employment. The practical trigger point is seven years of continuous employment with one employer — that's when an employee becomes entitled to take leave, and when a payout becomes payable if employment ends. This is a deliberate reduction from the old 10-year threshold under the 1992 Act, which the 2018 Act replaced from 1 November 2018.

Run the ratio and it lines up with Business Victoria's own worked examples: 7 years (364 weeks) ÷ 60 = roughly 6.1 weeks; 7 years 6 months (390 weeks) ÷ 60 = 6.5 weeks; 10 years (520 weeks) ÷ 60 = roughly 8.7 weeks. There is no proportionate payout if employment ends before seven years is reached — the Act's calculator tool makes this explicit: it will show an accrued estimate below seven years, but states plainly that no entitlement exists yet. Once seven years is reached, any untaken leave must be paid out in full on the employee's last day, regardless of why employment ended — resignation, dismissal, redundancy, or death (in which case it's paid to the employee's estate). Under section 9(2) of the Act, failing to pay an employee's accrued LSL entitlement on the day employment ends is itself an offence, carrying up to 12 penalty units for an individual or 60 for a body corporate per day the breach continues — at the current Victorian penalty unit value of $203.51 (1 July 2025 to 30 June 2026), that's up to roughly $2,442 for an individual or $12,211 for a company, per day.

An employee can request to take accrued leave any time after seven years, in blocks of at least one day by agreement, and employers must grant the request "as soon as practicable" unless there are reasonable business grounds to refuse. Employers can also direct an employee to take leave, but only with at least 12 weeks' written notice. Leave can't be cashed out while employment continues — agreeing to pay instead of granting leave is itself unlawful.

How continuous service is actually calculated

This is where most payroll errors happen, because "continuous employment" isn't simply "did they keep working." Two separate questions matter: does an absence break continuity, and separately, does that period of absence count toward the 60-week accrual ratio?

Parental leave. Paid or unpaid maternity, paternity or adoption leave does not break continuity. The first 52 weeks of unpaid parental leave count automatically toward the accrual period; longer unpaid absences can still count if the employer and employee agree in writing before the leave starts, an enterprise agreement provides for it, or the absence is due to illness or injury. For manufacturers managing return-to-work after extended parental leave, this interacts directly with injury management and return-to-work duties — both frameworks hinge on correctly tracking an employee's continuous service date.

Illness, injury and WorkCover absences. Absences for illness or injury — including time on WorkCover benefits — do not break continuity, regardless of length, for absences from 1 November 2018 onward. An employee on WorkCover or working under a return-to-work plan has their LSL payout calculated using whichever is greater: their pre-injury normal weekly hours and pay, or their hours and pay immediately before the leave starts. Getting this wrong is a common source of underpayment claims, particularly for manufacturers who've had a long-tenured employee on a graduated return-to-work program.

Unpaid leave generally. Unpaid leave of up to 52 weeks counts toward the accrual period; beyond that it generally doesn't, unless one of the same exceptions above applies. Stand-downs for lack of work don't break continuity either.

Resignation and re-employment. If an employee resigns or is dismissed and is re-employed by the same employer within 12 weeks, continuity is preserved (though the gap itself doesn't count toward accrual). Beyond 12 weeks, continuity is broken and the clock restarts.

Change of ownership or transfer of business. This is the one manufacturers most often get wrong during a plant sale, restructure, or outsourcing of a function. Under section 11(7) of the Act, where a business is sold or its assets (including intangibles like goodwill and customer lists) transfer to a new operator, and the new operator re-employs the staff within 12 weeks, the new employer inherits the full LSL liability for the employee's entire service — including years worked for the previous owner. Section 11(8) applies the same principle if the previous employer was in liquidation. The outgoing employer should not pay out accrued LSL at the point of sale if the employee is continuing with the new owner; instead, the liability and the records both transfer. The same logic applies to insourcing and outsourcing — if you move a function to a labour-hire provider or contractor and the affected employees move with it, the new employer must recognise their prior service, and vice versa if you bring the function back in-house. If you're evaluating a labour-hire arrangement for a production line, this liability transfer is worth reading alongside labour-hire licensing obligations for host employers — the two compliance regimes often get negotiated in the same contract.

What you must record and provision for

Employers must keep accurate LSL records for each employee's entire employment, and retain them for at least seven years after employment ends (or after the employee's death). Records must be produced to an authorised officer on request, and a copy must be given to the employee (or their representative) on request. Refusing to produce records, refusing a copy request, or creating a false record are all separate criminal offences under the Act, carrying the same 12/60 penalty unit range as non-payment.

In practice, for a manufacturing employer this means your payroll or HR system needs to track, per employee: start date, any breaks and their duration and type (parental, unpaid, WorkCover, stand-down), ordinary hours and pay across the relevant averaging periods (last 52 weeks, last 260 weeks, and whole-of-service — you use whichever produces the highest figure where hours or pay have varied), and leave taken or paid out. On the financial side, LSL is a real, growing liability sitting on your books the moment someone crosses into year two — it's worth factoring into the same workforce-cost planning you'd do around WorkSafe premium and claims history, since both are long-tail costs that compound with tenure and are easy to underestimate when budgeting for an ageing, loyal shop-floor workforce.

Next steps: audit every employee past the five-year mark now, confirm their continuous-service start date accounts for any parental, WorkCover or unpaid leave correctly, and if you're planning a sale, restructure or outsourcing arrangement, get the LSL liability transfer terms into the contract before signing — not after.

This article is general information for Victorian manufacturers, not legal advice. Last updated: 18 October 2026.