By Louise Missen | Head of Member Services, Australian Payroll Association
What payroll and HR teams need to know
From 1 March 2026, NSW Industrial Relations has released updated guidance on the interpretation and calculation of Long Service Leave (LSL). While the Long Service Leave Act 1955 itself remains unchanged, this guidance provides much-needed clarity around complex employment arrangements and pay structures.
The update focuses on consistency and fairness in how leave is accrued and paid across the state, particularly in areas that have caused confusion for many employers, such as casual service, variable hours and fluctuating remuneration.
Key Guidance Updates
NSW Industrial Relations has issued a new step-by-step framework for calculating LSL entitlements. The goal is to promote a uniform approach and reduce ambiguity in everyday business scenarios.
Highlights include:
- Casual service and breaks: Clarifies how zero hour weeks and breaks between assignments affect continuous service, ensuring fair accrual for regular and systematic casuals.
- Fixed-term contracts: Outlines how to assess continuity between contracts to avoid unintended service gaps.
- Fluctuating hours: Provides calculation methods based on actual working patterns rather than standard hours, supporting accuracy for variable rosters.
- Ordinary pay or averaged earnings: Defines when to use fixed ordinary pay versus 12-month or 5-year averages for employees with inconsistent pay.
- Bonuses and incentive schemes: Confirms that recurring, scheme-based bonuses form part of average remuneration when payable at the leave date.
- Single-day LSL access: Allows employees, by agreement, to take LSL in up to four single-day blocks without affecting accruals.
- Partial year entitlements after 15 years: New examples clarify that employees are paid for all completed service, not just full years, e.g., 18 years, 3 months, and 2 days.
- Review active LSL accruals and payments against the NSW guidance.
- Implement or update internal templates to reflect average hourly or pay calculations.
- Train payroll and HR teams using credible sources such as the APA LSL Masterclass: APA Training
- Use the official NSW Government calculator for challenging cases.
- Maintain clear documentation for all accrual and payment decisions.
Transition and Assurance
This guidance applies prospectively from 1 March 2026. Employers are not required to revisit historical calculations, and previous audits, prosecutions, and completed reviews remain unaffected. For ongoing inspections, NSW IR officers will advise on how to apply the updated rules to current cases.
Compliance Implications
Payroll system configuration:
Most software platforms do not automatically handle NSW specific LSL rules. Manual adjustments or calculation templates may be needed, particularly for casuals, bonus averaging or one day leave scenarios. Review your system settings now to ensure they align with the new approach.
Data accuracy and recordkeeping:
Accurate LSL calculations depend on comprehensive employment data rosters, timesheets, contract chains and bonus histories over multiple years. Missing records can lead to underpayment risks and potential audit exposure. Strengthening document retention and verification processes will be key for compliant outcomes.
Practical Action Steps
Moving Forward
The refreshed NSW guidance provides transparency but also introduces a higher standard for payroll precision. Employers who adapt early, by tightening data integrity and ensuring staff capability, will strengthen compliance confidence and employee trust in their payroll outcomes.
Access the new NSW guidance here:
NSW Government – Long Service Leave Guidance
