The Long Service Leave Act 2018 (VIC) (the Act) ensures that all employees in Victoria, including casual employees, are entitled to long service leave after seven years of continuous service with one employer. But how do the terms “continuous service” and “one employer” apply if the employee is on-hired by a labour hire agency, or in other circumstances where they are effectively in the same role but have had different employers? 

In this article, we break down some of this terminology and look at specific hypothetical examples. Note that although long service leave (LSL) is an entitlement under the National Employment Standards, LSL is not covered by the Fair Work Act but by relevant state legislation. We have focused on the Victorian state legislation; other states have similar legislation, but there are differences, so it’s worth seeking further advice if you are unsure. 

Continuous service 

There is room for confusion when it comes to what is considered continuous service. Certain absences do not break continuous service under the Act, while others do. Similarly, certain absences count towards the period of employment for long service leave purposes, while others do not. 

In most cases however, continuous employment is only broken when there is a break of 12 weeks or more. For casual employees this means that if they are reassigned after 12 weeks not working, their accrual of service for LSL starts again from zero. 

Exceptions that normally do not break the service are parental leave and leave due to illness or injury. In such instances, service is considered to have been continuous, though time spent not working does not count towards the overall years of service. 

One employer 

More important however for on-hired employees and employers wanting to take over on-hired employees is the notion of “one employer”. For the purposes of long service leave in Victoria, since the introduction of the Act in 2018, an employee is taken to be employed by one employer: 

1. when they continue their employment when the business is sold, 
2. when an employer outsources or insources work and the employee moves to the new employer, or 
3. when the employee continues their employment when assets, such as labour hire contracts, are transferred to another employer. 

Let’s take a look at each of these in turn, with specific hypothetical examples. 

1. Employee continues with new business owner  

Where a business is sold and an employee remains with the business, the new employer becomes responsible for the employee's LSL entitlement. The period of employment with the old employer transfers to the new employer, who becomes liable for the LSL accrued across the entire period of employment. The old employer should not pay out accrued LSL to the employee. 

If an employee is dismissed by either the old or the new business owner but is re-employed by the new business owner within 12 weeks, their employment will remain continuous for LSL purposes. 

Example: 

Maya has been employed for five years when the business she works for is sold. The new owner continues to employ Maya and therefore her employment is continuous. The new owner becomes liable for Maya’s accrued LSL over the past five years. 

As the new owner of a business becomes automatically responsible for an employee’s period of employment with the first owner, it is important that the new owner receives all employee records relating to their LSL. 

2. The business is outsourcing or insourcing a role 

If an employer outsources work to another employer, such as a labour hire agency, and an employee moves to the new employer, the new employer must recognise the employee’s continuous employment with the host employer. 

This rule also applies if work is insourced. In this circumstance a host employer must recognise continuous employment with the previously contracted employer, the labour hire agency. 

Where work is contracted in and out over a period the same rule applies. In these circumstances an employee will be taken to have worked for one employer for the purposes of accruing LSL. 

Example: 

Vishal is employed by Widgets-R-Us, which decides to outsource its work to a labour hire agency. Vishal continues to work at his old employer but is now employed by the agency. 

After a year, Widgets-R-Us decides it no longer wants to use the agency and takes the role back in-house. As a result, Vishal once again becomes employed by Widgets-R-Us. 

Even though Vishal has worked for two different employers during these changes, his service for LSL purposes is deemed to be continuous. 

3. Moving from one labour hire agency to another in the same role 

If a business asset transfers to a new employer, the employee who performs duties in connection with these assets is treated as being employed by “one employer”. Assets include both physical and immaterial assets. Immaterial assets include things like contracts, good will, brand recognition, and customer lists. 

A business doesn’t have to be sold for assets to transfer to another business. It can occur in a range of circumstances. An example of this is when a business had a tender to provide services or operate a facility – for example a car park, providing labour hire or government service – and loses that tender to another business. 

Example:  

Harry has been on-hired by a labour hire agency to drive a forklift at a warehouse. After two years the warehouse owner decides to transfer its on-hired labour contracts to another agency. Harry keeps working in the same role but is now an employee of the new agency. The new agency becomes liable for Harry’s accrued service for LSL over the past two years. 

The recurring theme through all of these examples is that where an employee keeps working but the entity that pays them changes, the employee does not break continuous employment for LSL purposes. It’s important that labour hire agencies and employers with on-hired workforces are aware of their responsibilities and ensure employees receive the correct entitlements. 



This article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Speak to one of Bayside Group’s workplace relations specialists to find out more.