Understanding leave without pay

When a staff member requests to take leave without pay (LWP), or unpaid leave, especially if it’s the first time an employer has received this request, they may ask themselves the following questions – what is my responsibility and are there any guidelines around leave without pay?

Begin by confirming an employee’s leave entitlements

The starting point to determine what leave entitlements an employee has should always be the Fair Work Act 2009 (FW Act) and, if applicable, relevant provisions in a Modern Award or Enterprise Bargaining Agreement. Sometimes, employment contracts also contain provisions which deal with leave which should be considered.

Circumstances that may require an employee to apply to take leave without pay

An employee who has exhausted a paid leave entitlement may be able to continue to take leave without pay (LWP) – for example where a full-time employee is unwell and has used up their personal paid leave entitlements but continues to be ill.

Under the FW Act, certain employees are entitled to take LWP depending on their circumstances For example:

• a casual employees who falls ill
• employees who are expecting a child
• employees who engage in community services such as voluntary firefighting activities).

Recent changes to the FW Act now gives employees who are subjected to domestic violence the right to take five days unpaid family and domestic violence leave each year.

In some circumstances, employees can be directed to take LWP. This may apply to circumstances beyond the employer’s control – for example the requirement to shutdown  businesses during the recent COVID lockdowns. .

Employers may also enter into agreements with employees to take LWP where they do not have a legal entitlement to this (e.g. a career break). In those cases, it is important to be clear whether there will be continuity to their service or not – because this will impact the accrual of entitlements.

Establish a Leave Policy

It is always advisable for employers to develop a leave policy which summarises what leave entitlements employees have and in what circumstances they may take LWP or be directed to take LWP.

These policies can also address other issues of a more complicated nature such as whether leave entitlements will accrue while an employee is absent from work because of a workers compensation claim – which is dependent on State specific laws.

As at October 2022, the Federal Government was in the process of introducing legislation to change the current five days unpaid family and domestic leave entitlement to 10 days paid leave each year. As such, policies relating to this entitlement will need to be updated when those changes come into effect.

iHR Australia can provide the advice and support you need to create or review a Leave Policy.