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Ai Group: VIC long service scheme may cost employers $4m per year

27 August, 2015

In a major submission to the Inquiry into Portability of Long Service Leave Entitlements for Victorian Workers, the Australian Industry Group has demonstrated that a portable long service leave scheme across the Victorian workforce would cost employers over $4 billion per annum.

"The scheme would be over four times as costly as the existing long service leave provisions," Innes Willox, Chief Executive of the Australian Industry Group said.

"Implementing a portable long service leave scheme across the Victorian workforce is a ridiculous idea that needs to be rejected by the Victorian Government at the earliest possible opportunity. It's just another attempt to saddle employers with unnecessary costs at a time when they can least be afforded. The sooner this idea is rejected the better.

"Providing portable long service leave entitlements to Victorian workers would damage Victorian industry. The additional costs would make Victorian firms less competitive against interstate and overseas firms. The adverse impacts of such a massive cost impact would not be limited to employers; the impact would be felt by Victorian workers through lower employment, downsizing and plant closures.

"The idea that a long service leave scheme should be portable is an oxymoron.

"With portable long service leave schemes, service within the industry or workforce is counted rather than service with a single employer. Accordingly, these schemes conflict with the fundamental purpose of long service leave as a mechanism to reward lengthy service with an employer.

"The detailed analysis in Ai Group's submission highlights that portable long service leave schemes are around four times as costly as traditional long service leave schemes and the imposition of a levy across the Victorian workforce of the same magnitude as the existing levy in the Victorian Construction Industry Portable Long Service Leave Scheme (i.e. 2.7 per cent of ordinary pay) would cost Victorian employers over $4 billion per annum, compared to the $900 million per year cost of regular long service leave entitlements.

"The cost to the Victorian manufacturing industry would be $457.6 million per year which is about four times the current long service leave cost of $115.8 million per year.

“The cost to the Victorian health care and social assistance industry (an industry specifically referred to in the Inquiry's terms of reference) would be $357.5 million per annum, which is over four times the current cost of $82.7 million per annum.

"After considering union submissions in support of portable long service leave schemes, the Productivity Commission's Draft Report on Australia's Workplace Relations Framework stated (at p.176-178): 'A move to mandate portability at the current level of LSL entitlements would entail a significant increase in LSL costs to business.'

"In the absence of any counteracting wage reductions, this would have some dampening effect on employment and encourage businesses to use more capital instead of labour," Willox said.

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