Employers face superannuation bill around portable long service leave

The impact of the decision is likely to be significant for employers in the construction, security, community services and contract cleaning industries where portable long service leave schemes and enterprise agreements are commonplace. 

The FWC decision

The decision arose from a dispute about obligations and oil and gas services company employer had under its enterprise agreement to make superannuation contributions on long service leave payments by a worker entitlement fund, i.e. under a portable long service leave scheme. The enterprise agreement required superannuation contributions to be made during "paid annual leave, sick leave, long service leave, public holidays, jury service, bereavement leave, or other paid leave".  The employer’s position was that workers on portable long service leave were on unpaid leave, and therefore it had no obligation to make superannuation contributions. 

The FWC disagreed after it assessed how the enterprise agreement should be interpreted.  It considered that the agreement expressly referred to superannuation on “long service leave”, drawing no distinction between ordinary long service leave and portable long service leave. Further, the FWC rejected the employer’s submission that an employee taking portable long service leave corresponded to them taking unpaid leave or an unpaid absence. 

The employer also sought to argue that contributions were not required, relying on an Australian Tax Office (ATO) ruling from 2005 to support its case. That ruling provided that employers have no obligation to make superannuation contributions on long service leave payments made by worker entitlement fund. However, the FWC also rejected that argument, adopting the reasoning from the 2023 case of AMWU v Programmed Facility Management, which the FWC’s full bench subsequently upheld in 2024. In that 2023 ruling, the FWC said that the ATO ruling addresses obligations under the superannuation guarantee legislation only, but is not relevant where an enterprise agreement itself imposes superannuation contribution obligations.   

Implications for employers

The decision carries immediate practical significance for employers in industries where portable long service leave schemes apply, including construction, community services, contract cleaning and security. The Australian Workers Union (AWU), which brought the case against the employer, has flagged that thousands of construction workers may be entitled to superannuation back-pay as a result of the decision.   

Employers whose enterprise agreements contain superannuation obligations should review the obligation to consider its scope, evaluate any underpayment exposure, and consider future and retrospective actions. This may include ensuring future enterprise agreements carve out superannuation payable under portable long service leave schemes to ensure consistency with the ATO interpretive ruling.