Under the WA Long Service Leave Act, an employee must be paid their ‘ordinary pay’ when taking long service leave or when receiving payment for long service leave.
What is ordinary pay?
Ordinary pay is payment for an employee’s ‘normal weekly number of hours of work’ calculated on their ordinary time rate of pay.
An employee's ordinary time rate of pay is the rate that applies to the employee when:
- they take a period of long service leave; or
- they receive payment for long service leave that is cashed out; or
- they receive payment for untaken long service leave when their employment ends.
Ordinary pay does not include shift premiums, overtime rates, penalty rates or allowances.
For a casual employee, ordinary pay does include their casual loading.
Ordinary pay also includes the cash value of any meals or accommodation normally provided to the employee, if the meals and accommodation is not provided to (and taken by) the employee during a period of long service leave.
Normal weekly number of hours
If an employee’s normal weekly number of hours of work have varied during their employment, the normal weekly number of hours is the average weekly hours worked by the employee during that accrual period.
An employee’s normal weekly number of hours will include overtime hours if the employee regularly worked overtime during their period of employment.
Averaging the hours worked by a casual or seasonal employee takes into account periods when their employer did not provide them with work. For more information, visit Long service leave for casual and seasonal employees.
For calculating normal weekly number of hours for FIFO employees refer to the Ordinary pay for a FIFO employee section below.
Absences which are not counted when calculating the length of a full time or part time employee’s continuous employment (for example, a period of unpaid leave) are not included when averaging the employee’s hours.
Example
Full time employee Ezra, took 12 months of unpaid parental leave during a period of continuous employment. This 12 month period does not count towards the length of Ezra’s continuous employment. If Ezra’s hours require averaging over his period of employment, the averaging will not include this 12 month period during which Ezra was on unpaid leave and worked no hours.
Payment in advance for long service leave
An employer is required to provide payment in advance for a period of long service leave if the employee requests pay in advance in writing, before the period of leave commences.
Superannuation and taxation
Visit the Australian Taxation Office website for information on tax and superannuation on long service leave.
Ordinary pay for an employee paid by piece rates or commission
Show moreOrdinary pay for an employee who is employed on a system of payment by results (e.g. piece rates, commission, bonus work, etc.) is the average weekly rate earned by the employee during the previous 365 days ending on:
- the day immediately before the day on which the employee commences long service leave; or
- the day immediately before the day on which the employee and the employer reach agreement on payment instead of long service leave; or
- the day immediately before the day on which the employee was last in employment (if the employee is no longer employed).
Any periods of unpaid leave and stand down are excluded from the 365 day period. This ensures that employees are not disadvantaged if, for example, they have taken a period of unpaid leave - such as unpaid parental leave. However, any periods of paid leave are included in the calculation.
The average weekly rate for an employee who is paid a base rate and a commission/bonus is based on both the ordinary time rate of pay and the amount of the commission/bonus earned during the previous 365 day period.
To calculate the average weekly rate, the employee’s earnings, including any base salary plus bonuses, are totalled over the previous 365 days (excluding any periods of unpaid leave). This figure is then divided by 365 and multiplied by 7.
The average weekly rate method is only applicable where an employee is regularly paid an amount wholly or partly based on results, and this forms an integral part of their payment system. For example, this method would not apply if an employee received occasional or irregular bonus payments at the employer’s discretion.
In order to calculate long service leave entitlements, keeping employment records is very important.
Example 1 - Calculating ordinary pay
Alex is paid wholly by commission. Alex took six months’ unpaid parental leave from 1 April to 30 September 2022 and she wants to take long service leave from 1 January 2023. Her ordinary pay for this period of leave is calculated over a period totalling 365 days ending on the day immediately before the day on which her leave commences (i.e. 31 December 2022).
Calculating Alex’s ordinary pay requires averaging the commission she earned in the 273 days prior to 1 April 2022 and in the 92 days from when she returned to work between 1 October 2022 and 31 December 2022 (i.e. a total of 365 days excluding the period 1 April to 30 September 2022 when Alex was on unpaid leave).
Example 2 - Calculating payment when employment ends
Harley has resigned after working for a business for 8 years. Harley’s employer has used the WA long service leave calculator to estimate Harley’s pro rata long service leave entitlement, which equates to 6.94 weeks. Harley is paid a base salary plus commission, meaning Harley’s ordinary pay for this period is calculated over a period totalling 365 days ending on the day immediately before Harley’s last day of employment. Harley has not taken any unpaid leave during the last 365 days.
To calculate Harley’s average weekly earnings, Harley’s employer calculates the total amount of salary and commission earnt by Harley over the previous 365 days (in this case $100,000) and then divides this amount by 365 and multiplies it by 7 (e.g. $100,000 / 365 * 7 = $1,917.81).
To calculate Harley’s pro rata long service leave payment on termination, Harley’s employer multiplies Harley’s average weekly earnings by Harley’s pro rata long service leave entitlement (e.g. $1,917.81 * 6.94 weeks = $13,309.60).
Ordinary pay for a FIFO employee
Show moreThe average weekly number of hours for a FIFO employee will include both ‘on weeks’ and ‘off weeks’.
For example, if a FIFO employee works a 2 week on and 1 week off roster and works 77 hours per week when they are rostered on, their average hours worked over the 3 week cycle would be 51.33 hours per week (154 hours / 3 weeks).
