Set Up Long Service Leave for Casual Employees in Xero

Templates and tools (Example 1)
June 15, 2018

All casual employees in Victoria, Australia, are entitled to long service leave (LSL) after 7 years of continuous service. LSL is calculated based on all the hours an employees has worked over the years since they commenced employment. This takes into account their variations in hours over the years.

Setting up casual LSL in Xero requires the following steps:

1. Create a new Pay Item: “Casual Hours”

  • Go to Payroll Settings
  • Select Pay Items
  • Select Earnings
  • Add a new Ordinary Time Earnings item with the following properties:
    • Earnings Name: Casual Hours
    • Display Name: Casual Hours
    • Rate Type: Multiple of employee’s ordinary earnings rate
    • Multiple: 1.0
    • Expense Account: Choose the appropriate account for your practice
    • Tick the boxes for “Reportable as W1 on Activity Statement” and “Accrue Leave for this Earnings Rate”

2. Create a new Pay Item: “Casual Loading”

  • Add another Ordinary Times Earnings item with the steps above. This time the properties are as follows:
    • Earnings Name: Casual Loading
    • Display Name: Casual Loading
    • Rate Type: Multiple of employee’s ordinary earnings rate
    • Multiple: 0.25
    • Expense Account: Choose the appropriate account for your practice
    • Tick the box for “Reportable as W1 on Activity Statement”

3. Add Long Service Leave type to Employee Record

  • Go to Current Employees
  • Select the employee
  • Select the Leave tab
  • Assign Leave Type with the following properties:
    • Leave: Long Service Leave
    • Leave Calculation Method: Based on Ordinary Earnings
    • Hours Accrued Annually: 32.9346
      • (This amount is calculated based on 8.6667 weeks leave for 10 years service for a standard 38 hour fulltime employee)
    • On termination unused balance is: Paid Out
    • Fill in the other properties with appropriate responses as is correct for your employee

4. Add Long Service Leave to Employee’s Pay Template

  • Select the Pay Template tab on the employee page
  • For the Ordinary Hours earnings line, enter the following information:
    • Hours: 0
    • Rate: the employee’s hourly rate without loading
  • Add a new Earnings Line:
    • Earnings Rate: Casual Hours
    • Calculations Type: Use Earnings Rate
  • When the line is added, enter the hours as required for the employee
  • Add another Earnings Line:
    • Earnings Rate: Casual Loading
    • Calculations Type: Use Earnings Rate
  • When the line is added, enter the same hours as for Casual Hours
  • Save the pay template

You may want to process a practice pay run to make sure your long service leave settings for casual employees are working.

Diane Hyde

Author: Diane Hyde

Diane Hyde is a Certified Xero Advisor. She is a Chartered Accountant and is principal at Hassall & Hyde Accountants and Bookkeepers.