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Long Service Benefits Portability Scheme - What community service employers need to know

Libby Pallot, Anthony Massaro, Abbey Burns, Ben Tallboys, Caitlin Walsh

The Long Service Benefits Portability Bill 2018, if it is passed, will have significant implications for the long service entitlements of Victorian employees in a range of industries, including community services.

The Bill has not yet passed either house in the Victorian Parliament, but is proposed to come into effect on 1 April 2019.

A new scheme

If passed, a statutory authority named the Portable Long Service Benefits Authority will be established.  It will operate similar to CoINVEST in the construction industry, and will administer and make payments under a portable long service benefits scheme in specified industries.

The legislation will extend long service benefits to workers in the specified industries, provided that the worker remains in that industry, regardless of whether their employer changes over the relevant period of service. After seven years' service, an eligible employee will be able to apply to the Authority for a cash payment of a long service benefit equal to 1/60th of their total period of recognised service, less any long service benefit paid during that period.

Which industries are covered?

Employers in covered industries must register for the scheme.  The legislation will establish portable long service benefits schemes for the following industries:

  • Community Services Sector
  • Security Industry
  • Contract Cleaning Industry

    Impact on the Community Services Sector

    The 'Community Services Sector' will cover an employer if they are:

  • a 'for profit' entity that employs at least one worker to perform community services work for persons with a disability;
  • a not-for-profit organisation that employs at least one person to perform community services work; or
  • a licenced children’s service under the Children’s Services Act 1996 (Vic) or an approved provider under the Education and Care Services National Law (Victoria).

    The definition of community service work is very broad, and captures various kinds of support that may be provided to persons with a disability, or who are otherwise vulnerable, disadvantaged or in crisis. It also captures services provided to assist particular cultural or linguistic communities.

    The Bill indicates that the Community Service Sector scheme does not apply to workers to whom the Aged Care Award 2010 applies. The scheme will also not apply to workers whose primary role is to provide health services to persons with a disability. The scheme also does not apply to local government community services, so it does not affect the portable long service leave scheme which already applies in that sector.

    The Bill provides that regulations may prescribe that certain employers or workers to whom other awards apply may also be excluded from the operation of the Bill. At present, no regulations prescribing other exceptions have been introduced to accompany the Bill. However, we expect that some existing enterprise agreements may also have the effect of excluding the scheme entirely.

    Returns and employer's levy

    Employers that fall within the scope of the scheme will be required to make quarterly returns to the Authority which include various details about employees who performed work for the employer during the quarter, the amounts paid to each worker and their leave entitlements.

    In order to fund the scheme, the Governing Board of the Authority will set a levy. It is not yet known what the employer’s levy will be, other than that it will not be more than 3% of an employee’s ordinary pay. It has been speculated that the levy will be set somewhere between 1.5% and 1.7%. Employers will be required to report to, and pay this levy to, the Authority. There will be significant penalties for non-compliance. 

    Key takeaways for employers

    Although the Bill has not passed, and not all details are known as yet, it appears likely that employers in the Community Service Sector may soon be subject to a new levy and reporting obligations under the scheme.  Employers should be mindful of the potential financial and administrative costs of complying with the scheme, if it is introduced, and ensure that their long service leave policy provides the flexibility they may require when managing leave requests.

    It is also important to note that while the scheme may not change the employee's entitlement to long service leave from the employee’s perspective, the total cost of the long service leave entitlement to the employer may well increase.

    Russell Kennedy will provide updates about the status and implications of long service benefits portability scheme as significant developments occur. In the meantime, please contact our Workplace Relations, Employment and Safety Team for advice about your potential obligations under the scheme (including whether the Bill will apply to your business).

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