WA Construction Industry Employers: Know Your Long Service Leave Obligations

In Western Australia (WA), the Construction Industry Portable Paid Long Service Leave Act 1985 is administered by the Construction Industry Long Service Leave Payments Board (known as MyLeave) which is a body corporate of state government appointed members represented by industry unions, the Master Builders Association and the Chamber of Commerce and Industry.

It’s a legal requirement for construction industry employers, as defined in the Act, to register with the Board and make long service leave contributions in respect of their construction industry employees. Failure to register or pay contributions can result in fines being applied by the Board.

National Employment Standards & Long Service Leave

Long service leave forms part of the National Employment Standards which applies to all employees covered by the national workplace relations system regardless of their applicable industrial instrument or contract of employment. This gives employees in WA an entitlement to 8 2/3 weeks leave after 10 years continuous service with one employer and a pro rata entitlement on termination after 7 years.

Construction Industry Portable Long Service Leave Scheme

The Construction Industry Portable Long Service Leave Scheme mirrors these benefits but has the added benefit of being ‘portable’ meaning that employees can accrue their long service leave entitlements across multiple employers in the construction industry.

Contributions are calculated as a percentage of a workers ‘ordinary rate of pay’, as defined in the Act, and are applicable to all employees, except apprentices, for the days they’re engaged in on-site construction work. The contribution rate, which is currently set at 1.5%, will be set at 1.35% of an employee’s ordinary time earnings from 2016 onwards.

Employers are also required to keep records of an employee’s name and address, date of birth, registration number, starting and finishing dates and the number of days on site. These records must be retained for at least seven years.

Ordinary Time Earnings

Contributions are payable on an employee’s ‘ordinary time earnings’ but what exactly does this mean? Employment legislation commonly defines the first 38 hours of work per week as the ordinary hours of work. Any work outside this span of hours is referred to as ‘additional hours’ to which most awards attribute an overtime or penalty rate.

Construction industry employers commonly pay staff a flat rate which is above the award minimum. Whilst this practice simplifies bookkeeping and payroll processing, employers forget that long service leave contributions are also payable on this higher flat rate of pay.

For such employers, it can be more cost effective to re-structure employee remuneration into a base rate for the first 38 ordinary hours of work and a penalty rate for all additional hours. This can also lead to additional labour cost savings as annual leave, sick leave and superannuation are all payable on an employee’s ordinary time earnings (if the employee’s contract or agreement is drafted correctly).

EI advises employers about the most cost effective ways to structure their employee entitlements and assists with the drafting of employment contracts and agreements.