When an employee has used all their leave entitlements, they may ask to take leave without pay. How do you create a leave without pay policy?

 

What is leave without pay?

Leave without pay is additional to any other form of leave that an employee is entitled to take. It is usually granted only when an employee has used up all their entitlement to other forms of leave.

The length and terms of leave without pay are subject to agreement between an employee and an employer. Leave without pay is not an enforceable matter in federal awards and rarely appears in state awards.

However, one potential advantage of having a leave-without-pay policy is that it allows an employer to retain staff who are unable to work for a period of time but have no annual, long-service, or paid sick leave accruals remaining. 

Another reason for leave without pay is when employees wish to take a 'career break', for example, to travel overseas, study, or care for family members for an extended period before returning to the same employer. 

As such, a leave without pay policy can be an effective retention tool; however, it isn’t mandatory under workplace legislation. 

 

Guidelines for drafting a leave without pay policy

When creating a leave without pay policy, consider: 

  • How employees' other leave entitlements will accrue while the employee is on leave. Under the Fair Work Act, no entitlement to annual leave or paid personal/carer's leave accrues while an employee is on unpaid leave, unless an industrial instrument governing the employee's employment provides otherwise. You should therefore check for any such provisions that cover your employees before issuing the policy.
  • Whether employee benefits such as superannuation contributions and insurance coverage will continue during the period of unpaid leave.

Keep in mind 'career breaks' of a year or more will probably not be requested often enough in small organisations to justify having a formal policy. Larger organisations that have such a policy usually set a minimum qualifying period (such as five years’ service) and a limit on the number of breaks that an employee can take.

All employers should retain the right to assess every case on its merits. This will involve finding a balance between the operational requirements of the business and treating every employee fairly. As such, the policy should not specify a right to leave without pay; rather, it should state.

 

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