What is leave without pay?
While not a legal obligation, employees can take leave without pay if both parties agree. An employee may request leave without pay if they wish to take an extended holiday and do not have enough accrued annual leave. They may also request unpaid leave for a personal matter which is not covered by any other type of official leave.
As an employer although you don't have to pay wages to an employee who takes unpaid leave, it's important to note that leave without pay does not mean termination of employment. Some other entitlements may still apply.
Reasons for taking unpaid leave
There are various reasons why an employee may request to take unpaid leave, including:
- extended travel.
- study.
- family obligations beyond what is covered in other leave provisions.
- illness, where the employee does not have sufficient sick leave entitlement to cover the period of illness.
Agreeing to unpaid leave
As an employer you are not obliged to grant an unpaid leave request to an employee. The leave only becomes official if both parties agree in writing. If you do not agree to the leave and an employee takes it anyway, there may be reason to start a disciplinary procedure.
How does unpaid leave affect annual leave entitlements?
If an employee is receiving weekly ACC payments or is on parental leave, this is considered continuous employment and therefore the employee will still be accruing leave. But this will impact on the calculation of annual leave payments.
In other instances, where an employee takes a continuous period of leave without pay which exceeds one week, this may affect annual leave calculations by extending their annual leave anniversary date. Alternatively, an employer and employee in these circumstances can agree that there will be no change to the date on which the employee becomes entitled to annual leave, but that the annual leave calculation will take into account the period of leave without pay.
What is an employee entitled to during leave without pay?
During unpaid leave an employee would not automatically receive any public holiday pay, sick leave or bereavement leave.
Benefits are calculated based on whether that day is one the employee would usually work. If so, you as an employer are obligated to pay the employee.
For example: If an employee is on unpaid leave because they are sick and don’t have enough sick leave, a public holiday during this period would be a day they would ordinarily work. In this case, they would be entitled to payment for the public holiday.
Employee entitlements during unpaid leave depend on whether or not the individual would usually work on that day.
For expert advice on unpaid leave and other leave entitlements, you can call the team at Peninsula 24/7.
This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.