One of the most common questions our members ask the Business Advice Hotline about is unpaid leave (also known as Leave Without Pay).
Quite often employees will approach their employer and request to take a period of leave without pay even if they have sufficient paid leave entitlements available to them, whether that be annual leave, long service leave or in instances where the employee is unwell or has caring responsibilities, personal leave. Employees may have a variety of different reasons why they are requesting unpaid leave such as wanting to save their paid leave entitlements for a future extended holiday.
What most employees and employers do not realize is that unpaid leave is not actually a standalone leave entitlement covered by legislation. There are some forms of unpaid leave (for example unpaid parental leave) which are provided for by the National Employment Standards (“NES”) and other industrial instruments, however as a general principle “unpaid leave” is generally left up to an employers discretion whether to approve such a request.
There are of course a number of exceptions to this, specifically regarding parental leave etc. All other instances of unpaid leave that are not provided for by either the NES or an industrial instrument, should generally be dealt with on a case-by-case basis, giving consideration to the employees and businesses situation and operational requirements. Employers should turn their minds to whether or not the Fair Work Commission could find that it was unreasonable for the employer to refuse an employees request for unpaid leave. Circumstances where unpaid leave may be deemed reasonable by an employer may be:
The best way for an employer to handle requests for unpaid leave is through following a clearly documented process in a leave policy. A leave policy should clearly outline the steps an employee needs to undertake to request unpaid leave and the circumstances in which unpaid leave might be approved. It is advisable that a leave policy should also outline the evidence requirements for unpaid leave, for example if the unpaid leave was relating to the employee being unwell, evidence of the employee being unfit for work may be required.
Employers should be aware that if a request for unpaid leave is approved, an employee will not accrue leave entitlements while they are on a period of unpaid leave. Further, if a public holiday falls during the period of unpaid leave, the employee will not be entitled to payment for the public holiday.
Employers are encouraged to review their leave policies today to ensure they appropriately address unpaid leave. Should you find that your policy does not cover unpaid leave, or you do not have a leave policy in place, you are encouraged to implement and update your policies as soon as possible.
Our Business Advice Hotline is available to provide you with advice on this complex issue, South Australian Business Chamber members can call the Business Advice Hotline on (08) 8300 0000 (select option 1).
If you need assistance with drafting or reviewing your leave polices, our team of industrial relations experts are on hand to provide you with advice – contact us today on the Business Advice Hotline.
