Unpaid Leave

Sometimes employers will receive requests from staff members who want time off work without pay. This kind of leave request can leave managers scratching their heads, wondering whether the employee is entitled to unpaid leave and how to process the leave request.  

What is unpaid leave? 

Unpaid leave is a term used to describe an employee taking time away from work without pay.  

In some cases, a modern award, registered agreement, or employment contract gives an employee the entitlement to a certain amount of unpaid leave. 

More often, unpaid leave is used when part-time or full-time workers have exhausted their paid annual leave or personal leave allowance but still need time away from work.  

What are the reasons for taking unpaid leave? 

There are many situations where an employee may apply for unpaid leave. Some of the most common reasons include: 

• Physical or mental health – If an employee is suffering from physical or mental health issues and has used all their personal leave, they may agree to take further time off without pay to fully recover.  

• Extended holidays – If an employee is planning a long holiday that extends beyond their remaining annual leave balance, they may ask for an unpaid leave of absence. 

• Birth or adoption of a child – If an employee is welcoming a new member into the family and has used all their parental leave, sometimes they will apply for unpaid leave.  

• Caring for an unwell or elderly family member – If an employee is responsible for caring for a sick or vulnerable family member and has exhausted all their personal leave, employers will often give permission for unpaid leave.   

• Community service – If an employee has to perform community service, they should be granted unpaid leave.  

Is unpaid leave an entitlement? 

In certain circumstances, employees are entitled to unpaid leave. The Fair Work Act 2009 specifies employee entitlements to unpaid parental leave, compassionate leave, family and domestic violence leave, and carers leave, all of which are covered by the National Employment Standards. 

Employers should also acknowledge that casual employees have the right to choose not to work or take some forms of unpaid leave under the National Employment Standards. These include unpaid carer’s leave and unpaid compassionate leave. 

If an employee has used all their unpaid leave entitlements but needs further time off work, applying for unpaid leave may offer a solution.

Do you know your leave obligations?

Understanding leave obligations can be a challenge for employers. Download our FREE E-Guide to get the latest information for your business. 

Download

Can an employer refuse an unpaid leave request? 

If an employee has used all their unpaid leave entitlements, or unpaid leave entitlements do not apply, it is up to the employer to decide if to approve the request or not.  

Whether or not the employer decides to approve a request will depend on a range of factors, including the employee’s length of service, how valid the unpaid leave reason is, and the timing of the leave request (an employer may be less likely to approve a request during traditionally busy periods).  

In the interest of clarity and managing the expectations of your staff, it is advisable to have an unpaid leave policy, which should be included in your company’s leave policy documents.  

What are the benefits of approving unpaid leave requests?  

It is recommended that employers approach any unpaid leave requests with an open mind and factor in how it may improve the employee’s wellbeing, productivity and loyalty to the business.  

The benefits of approving unpaid leave requests include: 

• The break could refresh the employee, preparing them to perform at their highest level when they return.  

• Approving unpaid leave during a time when business is normally slow could be financially beneficial. 

• The time off work might give the employee a chance to learn a new skill that’s valuable to the business.  

• Granting unpaid leave requests could help to improve workplace culture, staff engagement, and employee retention. 

How should an employee submit an unpaid leave request? 

An employee needs to submit a request for unpaid leave before taking time off work. There is normally a minimum amount of notice an employee needs to give their employer when making an unpaid leave request.  

The process for requesting unpaid leave is normally set out in an award, registered agreement, company policy or employment contract.  

In many cases, the process is the same as applying for annual leave, although the employee may wish to have a conversation with their line manager before sending a formal request.  

Can an employer force an employee to take unpaid leave? 

In some circumstances, an employer can demand that an employee takes unpaid leave. This is called a lay-off, and only applies when: 

• It is included in their employment contract. 

• It is common practice in your business (evidence of earlier cases may be needed). 

• There is an agreement between your company and a trade union. 

• If there has been a change in the employment contract allowing lay-offs (this change must be clearly documented in writing). 

Lay-offs are normally temporary and used when a business is experiencing reduced staffing needs. Generally, the aim is to bring the employee back to work as soon as possible.