Impacts of taking leave without pay 

Unpaid leave is most commonly used when full-time or part-time employees have exhausted their accrued paid annual or personal leave entitlements. For example, where a full-time employee falls ill and has used up their personal paid leave entitlement but requires time off work.

Alternatively, you may find yourself in a situation where permanent staff have accrued paid leave available but have requested to use unpaid leave instead, essentially saving their paid leave. Staff should use their accrued leave first, and then move into a period of unpaid leave if necessary.

Paid leave entitlements are a financial liability for practices, which is why in all instances paid/accrued leave should be used first, and a period of unpaid leave should be the last resort. 

Taking this type of leave can have an effect on an employee’s continuous service and other paid leave entitlements. When full-time and part-time employees take a period of leave without pay, they do not accrue other paid leave entitlements like annual or personal leave.

Depending on the length of the unpaid leave and the reason for it, this may also impact their long service leave entitlement. Not all staff are aware of this and it would be worth explaining before they request leave without pay. 

There are exceptions that apply for certain types of unpaid leave, including unpaid community service and jury duty. In terms of exceptions that apply when calculating service for some National Employment Standard entitlements, unpaid leave that has been agreed by both the employer and the employee counts towards an employee’s continuous service for:

• an employee’s right to request flexible working arrangements
• unpaid parental leave and related entitlements 
• notice of termination or payment in lieu of notice.

For the purpose of these entitlements, the entire period of employment will count as service except for any periods of unauthorised leave. 

Example
Sarah has been employed with the same employer for six years. As agreed by her employer, she takes a year of unpaid leave to travel overseas. During Sarah’s period of unpaid leave, she does not accumulate annual or sick/carer’s leave.

When Sarah returns to work her service continues. This means that she doesn’t start a new period of service with her employer.

A year later, Sarah’s position is made redundant. To work out Sarah’s redundancy pay, her employer doesn’t count the year that Sarah was on unpaid leave. Her employer does count her years of service before she went on unpaid leave and the time since she returned. 

To work our Sarah’s notice period, her employer counts the whole time that she was employed, including the time before she went on unpaid leave, the year she was on unpaid leave and the time since she returned. 

	Workplace Relations Support  Workplace Relations Support assists practice managers on what leave is appropriate to use for certain circumstances. You can contact us via phone (07) 3872 2222 and email support workplacerelations@amaq.com.au.
	Workplace Relations Toolkit  Workplace Relations Toolkit subscribers receive a Leave Policy as part of their subscription. As new legislation around leave comes into effect or changes occur under Fair Work, the WR team will review the policy and distribute an amended version to all subscribers.
	Workplace Relations Consultancy Workplace Relations Consultancy can provide comprehensive advice to practice managers with managing employee leave and how to have conversations with staff around excessive leave accruals.