Unpaid leave

What Is Unpaid Leave?

Unpaid leave, also known as leave without pay, refers to periods of time off work that an employee takes without receiving payment for their ordinary hours. Unlike paid leave entitlements such as annual leave or personal/carer's leave, unpaid leave does not draw from an accrued leave balance. It is either a specific entitlement under Australian employment law, or it is granted by mutual agreement between an employer and an employee.

Unpaid leave provides flexibility for employees to address personal circumstances that require time away from work, while generally allowing them to maintain their employment relationship. For employers, understanding the various types of unpaid leave and their implications is crucial for compliance and effective workforce management.

Types of Unpaid Leave in Australia

In Australia, unpaid leave can arise from entitlements under the National Employment Standards (NES) or from employer-employee agreement:

1. NES Unpaid Leave Entitlements: These are mandated by the Fair Work Act 2009 and apply to all eligible employees:
   • Unpaid Parental Leave: Eligible employees are entitled to up to 12 months of unpaid parental leave (with a possibility to request an additional 12 months) for the birth or adoption of a child. This can also include flexible unpaid parental leave.
   • Unpaid Carer's Leave: All employees (including casuals) are entitled to 2 days of unpaid carer's leave per occasion when an immediate family or household member needs care due to illness, injury, or an unexpected emergency. Full-time and part-time employees can take this only after their paid personal/carer's leave is exhausted.
   • Unpaid Compassionate Leave: Casual employees are entitled to 2 days of unpaid compassionate leave per permissible occasion (e.g., death or life-threatening illness/injury of an immediate family or household member). Permanent employees receive paid compassionate leave under the NES.
   • Unpaid Community Service Leave: Employees (including casuals) are entitled to unpaid leave for voluntary emergency management activities and for jury duty beyond the first 10 days (for which permanent employees receive make-up pay).
2. Agreed Unpaid Leave (Leave Without Pay):
   • Employees can request unpaid leave for personal reasons not covered by NES entitlements (e.g., extended travel, study leave). Granting this type of leave is generally at the employer's discretion, unless an award or enterprise agreement specifies otherwise.
3. Stand Downs:
   • In specific circumstances (e.g., equipment breakdown, industrial action, natural disaster where no useful work can be performed), an employer may have the right to stand down employees without pay under the Fair Work Act or an applicable industrial instrument.

Impact on Continuous Service and Entitlements

A period of unpaid leave generally affects an employee's continuous service and accrual of entitlements differently:

• Does NOT Break Continuous Service: Most periods of authorised unpaid leave (including all NES unpaid leave) do not break an employee's continuous service with their employer. This means the employee's total length of employment is preserved for certain entitlements (e.g., right to request flexible working arrangements, notice of termination, redundancy pay).
• Does NOT Count Towards Length of Service: For many entitlements (such as accruing annual leave, personal/carer's leave, or for calculating long service leave in most jurisdictions), periods of unpaid leave generally do not count towards the length of service.
• Exceptions: Unpaid Community Service Leave (for voluntary emergency management activity and jury duty) is generally an exception and does count as service. Unpaid parental leave does not break service but does not count for accruals.

Impact on Payroll

When an employee is on unpaid leave:

• No Wages Paid: The employee does not receive their ordinary wages for the period of leave.
• No PAYG Withholding: As no wages are paid, no PAYG tax is withheld for that period.
• No Superannuation: Generally, superannuation contributions are not required for periods of unpaid leave because no Ordinary Time Earnings (OTE) are paid. However, there are exceptions, such as during periods of unpaid parental leave where the employer may be required to continue contributions if an agreement is in place or if the employee makes specific arrangements.

How Microkeeper Manages Unpaid Leave

Microkeeper's integrated Workforce Management system helps businesses administer unpaid leave efficiently and compliantly:

• Leave Request System: Employees can submit requests for various types of unpaid leave through their self-service portal (via the app or web), specifying the reason and attaching supporting evidence. Managers can review and approve these requests within the HR Software module.
• Timesheet Integration: Approved unpaid leave periods are automatically flagged and reflected in employee Digital Timesheets, ensuring accurate recording of non-working hours.
• Payroll Processing: Microkeeper's Payroll Software is configured to correctly handle unpaid leave, ensuring that no wages or PAYG withholding are calculated for the period. It also manages the impact on Superannuation Guarantee (SG) calculations.
• Accrual Management: The system helps manage the impact of unpaid leave on the accrual of paid leave entitlements, pausing accruals where necessary (e.g., for extensive agreed unpaid leave).
• Reporting: Generate reports on unpaid leave taken across the organisation, aiding in workforce planning and supporting audit requirements for industries like Healthcare or Labour Hire and Recruitment.

FAQs About Unpaid Leave

Is unpaid leave an automatic entitlement for all employees in Australia?‍

No. Only specific types of unpaid leave, such as unpaid parental leave or unpaid carer's leave (after paid leave is exhausted), are automatic entitlements under the National Employment Standards. Other requests for "leave without pay" are generally at the employer's discretion.

‍Does unpaid leave break continuous service?‍

Generally, no. Periods of authorised unpaid leave do not break continuous service. However, they typically do not count towards the length of continuous service for calculating accruals of paid leave entitlements (like annual or personal leave), with some exceptions like unpaid community service leave.

Do casual employees get unpaid leave?‍

Yes. Casual employees are entitled to specific types of unpaid leave under the NES, including unpaid carer's leave, unpaid compassionate leave, and unpaid community service leave.

Is superannuation paid during unpaid leave?‍

Generally, no, because superannuation is typically calculated on Ordinary Time Earnings, and no wages are paid during unpaid leave. However, specific rules apply for certain types of unpaid leave (e.g., unpaid parental leave, where contributions might continue if an agreement is in place or certain conditions are met).

Can an employer force an employee to take unpaid leave?‍

Generally, no, an employer cannot force an employee to take unpaid leave unless it is a legal "stand down" due to specific circumstances (e.g., natural disaster, equipment breakdown) where no useful work can be performed.

Best Practices for Managing Unpaid Leave

• Know Your Obligations: Understand which types of unpaid leave are entitlements under the NES and when you have discretion.
• Establish Clear Policies: Have a clear workplace policy outlining how to request unpaid leave, notification requirements, and evidence.
• Document Agreements: For discretionary unpaid leave, ensure a clear written agreement is in place, detailing the terms and impact on entitlements.
• Accurate Record Keeping: Use robust payroll and HR software to accurately track all periods of unpaid leave and their impact on continuous service and entitlement accruals.
• Communicate Clearly: Inform employees of the implications of taking unpaid leave on their pay, superannuation, and future leave accruals.

Final Thoughts

Unpaid leave serves as an important flexibility mechanism within the Australian employment framework, balancing employee needs with business realities. For employers, diligent management, adherence to Fair Work obligations, and transparent communication are vital. Leveraging comprehensive workforce management systems can significantly streamline the administration of these diverse leave types, ensuring accuracy and compliance.

_{Disclaimer: This entry is intended for informational purposes only and does not constitute legal or employment advice. For tailored guidance, contact the Fair Work Ombudsman or an employment law specialist.}