How to Calculate Leave Entitlements for Casual Employees
Calculating leave entitlements for casual employees can be a complex task due to the nature of their employment. Unlike permanent employees, casual workers typically don’t accrue paid annual or sick leave. However, they may be eligible for other entitlements and long service leave under certain conditions. In this one, we will guide you through the steps to calculate long service leave for casual employees, ensuring compliance with Fair Work regulations.
What is a Long Service Leave?
Long service leave is a period of paid leave granted to employees who have been with the same employer for an extended period, usually between 7 to 10 years, depending on the state or territory. Casual employees are entitled to this leave just like permanent employees, and the calculation is based on their average hours worked.
What is required?
To calculate a casual employee’s long service leave entitlement, you’ll need:
- Employment Start Date: The date the employee began working with you.
- Current Hourly Rate: The employee’s current base pay rate, including casual loading.
- Work Hours Record: Detailed records of hours worked over the last three years (156 weeks).
- Unpaid Leave Periods: Any periods of unpaid leave or workers’ compensation.
- Previous Long Service Leave: Any long service leave already taken.
How to calculate?
Step 1: Gather Work Hours Data
Compile the total hours worked by the employee over the last 156 weeks. This period represents the three years immediately before the intended long service leave date. Ensure you include all hours worked, including overtime.
Step 2: Adjust for Unpaid Periods
If the employee took any unpaid leave or was on workers’ compensation during these 156 weeks, extend the period further back to cover 156 actual working weeks.
Step 3: Calculate Average Weekly Hours
Divide the total hours worked by 156 to find the average number of hours worked per week.
- Formula:
Average Weekly Hours = Total Hours Worked ÷ 156
Example Calculation:
Let’s say a casual employee named Alex has the following work hours over the past three years:
- Year 1: 1,100 hours
- Year 2: 1,500 hours
- Year 3: 1,000 hours
Total hours over three years:
1,100 + 1,500 + 1000 = 3,600 hours
Calculate the average weekly hours:
3,600 hours ÷ 156 weeks = 23.07 hours/week
Step 4: Determine Weekly Pay Rate
Multiply the average weekly hours by the employee’s current hourly rate to find the weekly pay during long service leave.
- Formula:
Weekly Long Service Leave Pay = Average Weekly Hours × Current Hourly Rate
Assuming Alex’s current hourly rate is $25 (including casual loading):
Weekly Long Service Leave Pay:
23.07 hours/week × $25/hour = $576.92
Step 5: Calculate Total Long Service Leave Entitlement
The amount of long service leave varies by state. For example, in South Australia, an employee is entitled to 13 weeks of leave after 10 years of continuous service.
Total Long Service Leave Pay:
13 weeks × $576.92/week = $7,500
Important to Note
- Rounding: Do not round numbers until the final calculation to maintain accuracy.
- Regular Reviews: Employers should calculate the average hours annually to keep records up to date.
- Compliance: Always refer to the specific legislation or modern awards applicable in your state or territory.
Avoiding Common Mistakes
- Including All Hours: Ensure all hours, including overtime, are counted in the total hours worked.
- Adjusting for Unpaid Leave: Extend the calculation period to account for any weeks not worked due to unpaid leave.
- Correct Pay Rate: Use the current base hourly rate, including any casual loading, but exclude overtime rates and penalties.
To Wrap Up
Calculating long service leave for casual employees requires careful record-keeping and adherence to the correct formulas. By following the steps outlined above, employers can accurately determine leave entitlements, ensuring fair treatment of casual employees and compliance with Fair Work and NES regulations.
How Does Workstem Help?
Simplify your payroll process and ensure accurate pay rates with Workstem’s automated payroll system. Our pre-built modern award interpretation software covers 122+ awards and 34 EBAs, and keeps you up-to-date with penalty rates and other award entitlements.
Choose between our Standard and Advanced plans, and enjoy a range of benefits such as Fair Work compliance, an employee self-service App, and custom rule set. We have integrated our system with Microsoft and Netsuite to provide you with a complete HR SaaS solution for your business.
Book a free demo with our payroll experts. Experience the efficiency and accuracy of Workstem today!
Read More:
All you need to know: Casual Employment Information Statement (CEIS)
Understanding Casual Employment Rights in Australia
Casual Employment and Superannuation: What You Need to Know
Casual workers: Are You Paying Tax Correctly?
Payroll Compliance for Casual Employees in Australia 2024
Efficient part-time employee scheduling and attendance with Australia’s best rostering software
