Leave without pay rules in Australia

Leave without pay rules in Australia outline when employees can take unpaid leave, how this leave impacts entitlements, as well as the employer’s obligations under the Fair Work Act. It’s well worth familiarising yourself with these rules in order to stay compliant and support a healthy workplace culture for all staff members.

What is leave without pay?

Leave without pay (LWOP), or unpaid leave, is an approved absence from work without salary or wage payments. Unlike paid leave, such as annual leave or personal leave, LWOP allows employees to be absent from work for extended periods without financial compensation.

When can employees take leave without pay?

Some types of unpaid leave are an entitlement under the National Employment Standards (NES), such as unpaid parental leave, unpaid carer’s leave, unpaid community service leave and unpaid compassionate leave (casuals only).

However, employees might also request unpaid leave outside of these standard provisions – for example, they may want to take on extended travel or studies. This type of LWOP is usually taken when other appropriate paid leave is exhausted. Employers aren’t legally required to approve these requests, as they generally fall outside NES, Award or Enterprise Agreement defined entitlements.

Employer discretion and legal considerations

Employers can approve or deny LWOP requests at their discretion if the leave being requested is not an entitlement under the NES, Award or Enterprise Agreement. That being said, decisions should always be fair and transparent and take into account the reasons for the request and the employee’s circumstances  to avoid workplace disputes or allegations of discrimination. Having clear policies in place will help you manage employee expectations and set the foundation for fair decision-making.

Differences between leave without pay and other leave types

• Annual leave: Paid leave entitlement accumulated over time.
• Sick leave: Paid leave for illness or injury.
• Long service leave: Paid leave accrued based on the length of continuous employment.
• LWOP: No pay provided. Approved at the employer’s discretion except for specific entitlements under NES, an Award or Enterprise Agreement.

For more information about unpaid leave and other types of leave, refer to the Fair Work Ombudsman guidelines.

Leave without pay rules in Australia

While the NES is a good starting point for overarching guidelines, Awards, Enterprise Agreements and employer policies can differ regarding the rules around LWOP. As an employer, it’s your duty to stay informed and fully compliant across applicable instruments.

Generally, periods of LWOP do not count as service which means that paid leave entitlements such as annual leave, long service leave and personal leave will not accrue while the employee is on LWOP. 

However, approved LWOP provided for by the NES does count as continuous service for entitlement to request flexible working arrangements, access to unpaid parental leave and notice of termination.

It is important to ensure employees understand possible impacts of LWOP on other entitlements. Employers should formalise their LWOP policies well in advance of any requests to avoid ambiguity and ensure HR compliance.

What employers need to include in a policy

Creating clear guidelines through a leave without pay policy in Australia will help to set transparent expectations. Some of the most important elements to include are:

• Eligibility criteria.
• Steps for applying for LWOP.
• Approval considerations and conditions.
• How benefits and entitlements might be impacted.
• Length of allowable unpaid leave periods.
• Guidelines for job security and return-to-work processes.

Best practices for managing leave without pay requests

It’s worth spending some time determining how you will manage LWOP requests. After all, when employers adopt best practices for LWOP management, they put themselves in the best position to keep the workplace culture positive. Consider things like:

• Consistency and fairness: Set out policies that are equitable for all employees to avoid any potential bias or allegations of unfair treatment.
• Clear communication: Ensure every employee understands exactly how LWOP will affect their entitlements and how it may impact their work or role.
• Documented processes: Formalise and document all approvals or refusals of LWOP for future reference.

FAQs about leave without pay in Australia

Can my employer refuse my request for leave without pay?

Yes, outside NES, Award or Enterprise Agreement entitlements, employers can refuse LWOP requests. To maintain good workplace relations, employers should provide clear, justified reasons and be transparent in their decision-making processes.

Does leave without pay affect my long service leave?

Generally, LWOP does not count as service for the purposes of accruing  paid entitlements such as annual or long service leave. However, some modern awards, enterprise agreements or employment contracts might have specific provisions, so always check these details before making a decision.

Can I take unpaid leave for personal or family reasons?

Employees can request LWOP for personal or family reasons. However, approval is at the employer’s discretion unless covered by NES, Award or Enterprise Agreement, enterprise entitlements like NES unpaid carer’s leave or unpaid parental leave.

What happens if I take extended leave without pay?

Extended LWOP can have an impact on your entitlements. Always discuss with your employer the likely impacts of LWOP before you take it.

It’s important that decision-makers understand the complexities of leave without pay rules in Australia. Employers need to be informed about legislation and other sources of entitlements in order to stay legally compliant and foster more positive employee relations over the long term.

At HumanX HR, we specialise in supporting employers with expert advice and compliance strategies to handle LWOP requests. Contact us today to learn how we work with employers across all industries to confidently manage leave without pay rules and requests, ensuring you uphold your compliance obligations and strengthen your organisational culture.

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