If you employ staff, parental leave is one of those issues that can feel straightforward until you have to calculate an entitlement, a notice period, or redundancy pay.
A common question we hear from small business owners is whether maternity leave counts as continuous service in Australia.
The short answer is usually yes (including where the employee takes unpaid parental leave), but the practical effect depends on what entitlement you’re looking at - because “continuous service” is used in different ways across the Fair Work Act, the National Employment Standards (NES), modern awards, enterprise agreements, employment contracts, and state/territory long service leave laws.
Below, we break down what continuous service means, how maternity/parental leave fits into it, and how to handle the most common employer scenarios (like long service leave, redundancy, annual leave accruals, and payroll records) so you can stay compliant and avoid disputes. Keep in mind that outcomes can vary depending on the employee’s award/enterprise agreement, contract terms (where permitted), and which state or territory they work in.
What Does “Continuous Service” Mean For Employers?
In employment law, “continuous service” is essentially the length of time an employee has been employed by you, counting some absences and excluding others, depending on the entitlement you’re calculating.
As an employer, continuous service matters because it commonly affects:
- Unpaid parental leave eligibility (generally, 12 months of continuous service is required)
- Redundancy pay (which scales with years of service)
- Notice of termination (minimum notice periods increase with service)
- Long service leave (usually governed by state/territory laws, not the NES)
- Some award-based entitlements tied to “service”
It’s also important to separate two related concepts:
- Whether employment continues during leave (it usually does), and
- Whether time on leave “counts” towards accruing a particular entitlement (this varies).
So when you’re asking whether maternity leave counts as continuous service, the more useful employer question is often:
“Counts as continuous service for what purpose?”
Does Maternity Leave Count As Continuous Service Under The Fair Work Act?
In most cases, maternity leave (as part of “parental leave” under the NES) does not break continuous service.
That means an employee who is on maternity leave is generally still considered employed by you, and their service is generally treated as continuous.
Does Unpaid Maternity Leave Count As Continuous Service?
This is where many employers get stuck, because unpaid leave often feels like it should “pause” service.
Under the Fair Work framework, unpaid parental leave generally doesn’t break an employee’s continuous service (because the employment relationship continues), even though it may not have the same accrual outcomes as paid work.
So, if your employee takes 12 months of unpaid parental leave, it typically:
- does not reset their start date
- does not break continuous service
- should be recorded as an authorised absence
However, whether that 12-month period counts towards accrual of certain entitlements (like annual leave) is a different question, and we cover that below. Also note that some “service” calculations and accrual rules can differ under awards, enterprise agreements, or state/territory legislation (particularly for long service leave).
Does Unpaid Parental Leave Count As Service?
If you’re using “service” in the sense of “has the employee been continuously employed for X period?”, unpaid parental leave is usually treated as part of the employee’s service (it doesn’t break continuity).
If you’re using “service” in the sense of “does time on leave build up an entitlement?”, the answer may be:
- yes for some rights tied to length of employment, and
- no for some accrual-based entitlements.
If you want consistency (and fewer disputes), it’s worth documenting your approach clearly in a Parental Leave Policy and aligning it with the NES and any applicable award or enterprise agreement.
How Continuous Service Interacts With Key Entitlements (Redundancy, Notice, Long Service Leave)
From an employer perspective, the “high risk” issues are the ones that involve calculations: what you owe, when you owe it, and how much.
Here’s how maternity/parental leave typically interacts with the big-ticket entitlements.
1. Redundancy Pay
Redundancy pay under the NES is based on an employee’s period of continuous service with you (with some exclusions and special rules, including for small business employers).
If an employee takes maternity/parental leave, that time generally does not break continuous service, which means it’s typically still part of the period you use when checking which redundancy bracket they fall into.
Practically, this matters if you’re making roles redundant soon after an employee returns from parental leave (or while they’re still on leave). If you assume their service “paused”, you may underpay.
If you’re modelling potential outcomes, a quick way to sense-check the numbers is a redundancy calculator - but always confirm what rules apply to your business size, your employee’s award/enterprise agreement, and the specific termination circumstances.
2. Notice Of Termination
Minimum notice under the NES increases with the employee’s length of continuous service.
Because parental leave generally doesn’t break service, an employee may cross into a longer-notice bracket while they’re on leave (or shortly after).
If you’re ending employment and considering payment in lieu of notice, you still need to base the notice period on the correct service calculation, and check whether any award, enterprise agreement or contract provides for more generous notice terms.
3. Long Service Leave
Long service leave is where it can get more nuanced, because long service leave is typically governed by state or territory legislation, not the NES.
In many states and territories, unpaid parental leave:
- does not break an employee’s continuous service, but
- may be treated as time that does not count towards the accrual of long service leave (depending on the jurisdiction and the type of absence).
This is a classic “continuous service vs accrual” trap: the employment relationship continues, but the leave may be excluded from the calculation of how much long service leave has built up. The detail can vary significantly between jurisdictions (and may also depend on when the leave was taken and how the absence is characterised under the applicable law).
Because long service leave rules vary by state/territory and sometimes by award/industrial instrument history, it’s a good idea to get advice if you’re:
- approaching an employee’s long service leave milestone (e.g., 7, 10, 15 years), and/or
- considering termination and a long service leave payout may be triggered.
Does Maternity Leave Affect Annual Leave And Personal Leave Accrual?
This is one of the most practical payroll questions: if an employee is on maternity leave, do their leave balances keep increasing?
The answer depends on whether the leave is paid or unpaid, and what entitlement you’re talking about (as well as any applicable award or enterprise agreement terms).
Annual Leave
As a general rule under the NES, annual leave accrues based on an employee’s ordinary hours of work, and does not accrue during periods of unpaid parental leave.
So, in a typical scenario:
- Paid leave (including some forms of paid parental leave provided by an employer) may count as time worked for accrual purposes, depending on the arrangement and instrument.
- Unpaid parental leave generally means annual leave does not accrue during that unpaid period.
However, even if annual leave isn’t accruing during unpaid leave, the employee is still employed and will generally still have their previously accrued annual leave balance sitting there until they return (or their employment ends).
This becomes particularly important if the employee resigns after coming back. You’ll need to handle payouts correctly, including any award-based requirements, and it’s worth double-checking your approach to annual leave on resignation.
Personal/Carer’s Leave (Sick Leave)
Personal/carer’s leave accrual can also be affected by unpaid leave periods. In practice, many payroll systems handle this automatically, but errors happen when leave is applied incorrectly (for example, when unpaid parental leave is recorded under a generic “leave without pay” category that triggers unintended accrual settings).
If you’re unsure, it’s worth checking:
- how your payroll system treats unpaid parental leave for accrual purposes
- what your applicable award says (some awards contain additional rules or terminology)
- your employee’s contract and any company policies
How To Manage Maternity Leave Properly In Your Business (Without Creating HR Headaches)
Even when the law is clear that parental leave doesn’t break service, practical issues can still cause disputes - especially in small teams where roles change quickly.
Here are the key steps we recommend taking as an employer.
1. Put The Right Expectations In Writing
A clear Employment Contract won’t replace the NES (you can’t contract out of minimum standards), but it will help you document the practical side of the relationship, like:
- position details and duties
- ordinary hours and pay
- how you’ll handle leave requests and evidence requirements (where relevant)
- confidentiality and return-of-company-property expectations
When it comes to parental leave, a policy is often just as important as the contract, because the policy sets out your internal process (not just legal minimums).
2. Use A Parental Leave Policy And Keep It Consistent
A well-drafted Parental Leave Policy can help you manage:
- how employees notify you and apply for leave
- communication expectations during leave (keeping in touch days, updates, etc.)
- return-to-work processes and planning
- how flexible work requests will be assessed
This reduces the risk of inconsistent decision-making (which is where many small businesses get into trouble, even with the best intentions).
3. Keep Strong Records (Especially For Payroll And Service Calculations)
To avoid future disputes about service, make sure you:
- record parental leave correctly in your HR/payroll system (including whether it is paid or unpaid)
- keep written confirmation of the leave start and end dates
- document any changes, like extensions or early returns
- track “keeping in touch days” if used
This becomes invaluable later if you’re calculating redundancy, notice, or long service leave and someone challenges the numbers.
4. Don’t Forget Your Award And Workplace Policies
Even if the NES sets the baseline, your employee may be covered by a modern award that adds detail around rostering, consultation, and certain leave-related processes.
Many small businesses find it easier to manage these expectations with a central set of workplace rules (rather than scattered emails and one-off decisions). That’s where a Staff Handbook can help, especially if you employ multiple staff members and want consistent processes for leave, conduct, privacy, and workplace behaviour.
Key Takeaways
- In most cases, maternity leave (parental leave) does not break continuous service, so the employment relationship continues while the employee is away.
- Unpaid maternity/parental leave generally counts as continuous service for length-of-employment calculations, but it may not count towards the accrual of certain entitlements (like annual leave) and long service leave accrual rules can vary by state/territory.
- Be careful with redundancy and notice calculations, because service may continue to “tick over” while the employee is on leave, potentially moving them into a higher entitlement bracket (subject to any applicable NES exclusions and special rules, including for small business employers).
- Long service leave can be more complex because state/territory laws apply, and unpaid parental leave may affect accrual differently depending on where your employee is based and the specific rules that apply to the absence.
- Clear contracts, policies, and accurate record-keeping are the best way to reduce disputes and ensure your payroll treatment matches legal requirements.
If you’d like help reviewing your maternity/parental leave process or updating your employment documents, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
