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LTSL, Gig Workers and the Future of Work



Australia has an entitlement for all employees called Long Term Service Leave (LTSL), and without getting into the tiny details, the entitlement allows all employees with great than X  years of service to receive a one-off annual leave awarded.  For example, in NSW the rules are: -

“Long service leave is a period of paid leave an employee can take after ten years’ service with the same employer, and further paid leave after each additional period of five years’ service with that employer.  Long term service leave is 8.67 weeks.  If you want to have all the detail, there are websites for each state that can give you all the specifics.”  Here is NSW.  If you are an HR person not from Australia, it is worth reading so that you have sympathy with your colleagues “down under”.

 

Also, the government gives business rules on how to account for Long Term Service Leave, as it is a liability that must be carried in the financials of the company.  For example in NSW the following guidance is given: -

Recognition and measurement of LSL Employees reach an unconditional legal entitlement to LSL after a qualifying period of service (e.g. seven or ten years). For shorter service periods, LSL may be payable on exit in some (but not all) circumstances. Under accrual accounting, an LSL liability is recognised even though a legal entitlement may not have yet arisen: “… an obligation is created when the employee renders service that will provide entitlement to the benefit if the specified event occurs.   If you want to read the whole account treatment in NSW, it is HERE

 

Keeping it simple for the sake of explanation, for an organisation that has 20 employees, all with five years of service and all paid $100k per year the company would need to accrue approximately $150k.  And yes there are all types of accounting rules regarding discounting etc. etc. BUT at the end of the day, there is an entitlement that creates a liability for the company and more importantly additional administration and reconciliation. 

The real question is how many employees are going to stay with the same employer for ten years or greater?  Is this entitlement that millennials or even Gen X employees value?  Given a choice would they prefer that the company spent the money in a different manner?

This is just one example, from one country where the current employment legislation and the implications for company financials and paperwork are totally out of alignment with the future of work.  There are hundreds of rules across the world that need to change to create the right environment for the future of work.

To create an environment with the gig economy can thrive there needs to be a paradigm shift in employment and other legislation.  And this change needs to be done in a manner that facilitates gig worker while at the same time protecting employees from employers who are trying to take advantage.  Gig workers can be of many different types and reasons.  Read my post on the Gig Economy and Technology there is a four box model that described why people chose “gig working” versus more traditional employment.  For the “Free Agents” and the “Casual Earners” having employment laws that support flexibility is key.  For these types of gig workers my top list of things that employers and regulatory bodies need to think about changing include: -

The definition of when an individual becomes a permanent employee.  Many counties have rules that state that if someone works for a company for X amount of time they are deemed permanent workers and are entitled to the rights etc. of a permanent employee even if the employer does not call them that.  Gig workers would like to be able to go work for who they want, for however long they want, without having to find ways around this type of employment law, such as sub-contracting through an agency.  Whole industries have sprung up to protect employers from non-permanent workers attempting to claim permanent status.

The terms upon which you pay gig workers.  Most gig workers are self-employed and go through the procurement process versus the HR processes.  Organisations are putting gig workers on the same payment T&C’s as big companies that don’t have cash flow issues.

Just because someone is a gig worker does not mean that they don’t need to have some specific skills based training to support your business needs and/or they don’t need to do annual compliance training and verification, so, for example, bullying in the workplace.  If the gig worker is on a contract, then make sure they build in the time and cost to meet your compliance and regulatory requirements.  And governments should look at tax credits for organisations to train both their permanent and “gig workers”.

But not everyone is on the “I love being a gig worker” side.  Some are doing gig working because they have to and they would much prefer to have a permanent role.  The Guardian did a great article on the plus and minus of gig working.  One of the observations made: -

As a result of government policy and changes in the labour market, self-employed people now make up about 15% of those in work in the UK. The self-employed have more flexibility and pay lower taxes in the form of national insurance, but they do not enjoy the rights or protections of employees

 

Having a minimum living wage could be one of the solutions, but not the only solution.  The gig economy and gig workers are here to stay, and governments, HR professionals, businesses and members of the “Me Inc.” world need to collaborate to come up with new solutions to these new challenges.

Article by Mary Sue Rogers

Inspiration for this article from Gary Kendrick of Directional HR

 

Posted On : 24-03-17

Commented by:  msrogers

Totally agree - which is why the financial liability of LTSL really no longer makes sense. I am sure there is something else our employees would value more - thanks for the comment much appreciate it

Posted On : 03-04-17

Commented by:  gene

My guess.. none to 15% of our young workforce will be with the same firm for 10 years...

Posted On : 02-04-17

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