By Anthony El Salim

Supermarket chain Woolworths appears to owe over one million dollars in long service leave to staff in Victoria, the Victorian Government announced in August.

The news came as Wage Inspectorate Victoria filed over 1000 charges in the Magistrates’ Court of Victoria against Woolworths Group Limited and its subsidiary Woolstar Pty. Limited. The allegation: the company failed to pay the correct long service leave to 1,235 former employees across 2018-2021, with some underpayments allegedly as high as $12,000.

The announcement follows crackdowns on some of Australia’s largest employers, including Coles as well as Woolworths. Both companies have been facing significant underpayment litigation and Fair Work Ombudsman investigations.

It’s important to examine how Woolworths got long service leave so wrong, why such failures can cost more dearly in certain states, why the company now faces criminal prosecution, and how can you plan for long service leave costs today, so your business’s brand and bank balance doesn’t suffer.

Even if employees have moved on, long service leave can cost

In Victoria, employees become entitled to long service leave after seven years of continuous service with one employer. This is defined by the Long Service Leave Act 2018 (Vic) (‘Vic LSL Act’). This is the shortest length of service required in any State and Territory in Australia, equal to the Australian Capital Territory.

It appears that Woolworths’ compliance failures with long service leave are limited to former employees – though the vast number of former employees compounds the problem.

Here is what your business can learn, particularly if you are doing business in Victoria:

When employees are terminated in Victoria for any reason, including serious misconduct, they must be paid in full in lieu of their accrued entitlement, less any leave already taken. The amount is to be paid in full on the final day of employment. This means that even had long service leave not been taken, there would have been a chance to review entitlements and correct any mistakes before termination.

Woolworths did, eventually, realise its mistake after an ‘extensive end-to-end review’ of its historical payroll over the period from 2018 (the introduction of the VIC LSL Act) to 2021. The company then self-reported its non-compliance to the Victorian Wage Inspectorate.

The VIC LSL Act makes it a criminal offence for employers to fail to pay long service leave. Some business groups and experts have suggested that Woolworth’s self-reporting should mean criminal charges shouldn’t be pursued, as it may discourage businesses’ self-reporting. However, for the criminal charge to be proved, intention to breach the VIC LSL Act isn’t required and so it’s not yet clear to say whether turning yourself in will let you get away with this crime.

Your business can learn a lesson from this

It’s common for businesses the size of Woolworths to have the backing of huge HR teams and access to a wealth of resources to support its payroll, and if they can get it wrong, then it’s easy to see how smaller businesses can also get caught out. These types of compliance issues can hurt businesses financially and cause reputational damage.

As a starting point, an understanding of each State and Territory’s long service leave legislation and how that affects the way you track accrual is essential.

Given that all these mistakes were concerning former employees, it’s clear that any payroll miscalculations or legislative misunderstandings had a final chance to be reviewed and corrected upon termination. Where employment ends with seven years’ of service or more in Victoria, or enough to be eligible in their State or Territory, it’s more than worth a review of an employee’s long service leave entitlement over their employment as your last chance to learn from Woolworths.

The calculation of the amount to be paid out will also be important. If required, the payment for employees with varying hours should be calculated properly following the relevant legislation and deductions for periods of leave should be made carefully. Any service before a transfer of business must also be considered. Long service leave is the most complicated form of leave, and care should be taken accordingly.

Get a review today and prevent costly consequences.

Your business shouldn’t wait until you’re caught off guard. Be proactive and enhance your understanding of long service leave so when the time arises, and trust us it will arrive, you will know how to handle it.

For more information on long service leave and what this means for you, contact the HR Assured team. To talk through the benefits of becoming an HR Assured client contact us today for an informal chat.

Anthony El Salim is a Workplace Relations Advisor at HR Assured. He assists clients with a range of employment relations and compliance matters via the 24/7 Telephone Advisory Service. He is currently studying for a Juris Doctor.