Employer's Guide to Unpaid Leave in Australia

Unpaid leave requests can be confusing, but you don't have to navigate them alone. Our guide helps you understand your legal obligations and provides strategies for balancing employee needs with your business goals. Find the answers you need to minimise workplace disruption and cultivate a supportive work environment.

Employee requests for unpaid leave

As a business owner, you may occasionally receive requests from employees for unpaid leave. These requests can leave you wondering if employees have a right to this time off and how best to handle such situations.

Employers have legal obligations under the Fair Work Act 2009 related to particular types of unpaid leave. These legally embedded forms of leave are generally linked to caring responsibilities, family emergencies or community service duties.

Understanding unpaid leave: when is it an option?

Unpaid leave means an employee takes time off from work without receiving their regular wages or salary. While employees are sometimes legally entitled to specific types of unpaid leave (outlined in their modern award, registered agreement, or employment contract), this option is more commonly considered if:

  • If an employee has exhausted the leave balances, meaning they have used up their allocated paid annual leave or personal/carer's leave.This is when unpaid leave offers a way to take necessary time off while still having their job secure.
  • If the employee needs time for important life circumstances. Unpaid leave can provide flexibility when employees face situations such as extended travel, family caregiving or personal challenges.

Common reasons for taking unpaid leave

Employees may request unpaid leave for a wide range of reasons. Some of the most frequent scenarios include:

  • Health and wellbeing - when employees experience physical or mental health concerns that extend beyond their accrued personal/carer's leave, unpaid leave provides time for necessary recovery.
  • Extended travel - or longer holidays that go beyond a employee's annual leave balance, unpaid leave can allow them to take the trip without losing their job.
  • Family care - caring for unwell or elderly family members sometimes requires more time than the standard personal leave allocation. Unpaid leave offers flexibility in these situations.
  • Birth or adoption - after exhausting parental leave entitlements, new parents may opt for additional unpaid leave to bond with their child.
  • Community service obligations - employees should be granted unpaid leave if they have commitments to legally mandated community service.

Australian employment laws clearly distinguish between instances where employees have a legal entitlement to unpaid leave (such as in the compassionate or carer's leave situations) and where an employer can exercise discretion. Understanding these differences is helps when considering unpaid leave requests, and having well defined leave policies within your business streamline these decisions.

When Is unpaid leave an entitlement under employment law?

It's important to understand that general unpaid leave isn't automatically an entitlement for employees. However, the Fair Work Act 2009 and the National Employment Standards (NES) outline specific situations where employees must be granted unpaid leave. These types of leave include:

  • Compassionate leave - An employee has the right to take compassionate leave when an immediate family member or household member faces a life-threatening illness, a significant injury, or in the event of their death.
  • Unpaid carer's leave - Employees are entitled to this form of leave in situations where an immediate family member or household member relies on them for care or support due to a serious illness, injury, or unexpected emergency.
  • Unpaid parental leave - Parents welcoming a new child into their family through birth or adoption are legally entitled to a significant amount of unpaid leave. This is designed to assist employees in establishing caregiving routines and bonding while also maintaining job security.
  • Community service leave - Certain community service duties fall under the National Employment Standards. Activities like participating in volunteer emergency management operations or serving on a jury are protected. Employees have the right to take unpaid community service leave when fulfilling these roles.

Sometimes employees might go beyond these legally mandated circumstances. If they've exhausted their entitled unpaid leave but need more time off, they may request additional unpaid leave. Whether to grant this request is up to the employer.

Can employers refuse unpaid leave requests?

While employees have specific unpaid leave entitlements defined by law, employers generally have the right to refuse unpaid leave requests that go beyond those entitlements. This decision often depends on several factors, including the employee's length of service, the reason for their leave request and the timing of the request. Employers usually consider how the employee's absence would impact the business and whether other employees can fill in the gaps.

It's essential to establish a clear unpaid leave policy within your company. This policy should outline the circumstances under which you might approve an unpaid leave request, helping manage employee expectations. When reviewing an unpaid leave request, the employee's overall performance record and your company culture are also likely to be factors in your decision.

Unpaid Leave Guide

Benefits of approving unpaid leave

It's encouraged for employers to keep an open mind towards unpaid leave requests and consider how they might benefit both the employee and the business. Some potential advantages of approving unpaid leave include:

  • Time away from work can help employees recharge, manage stress and return with renewed energy and focus. This increased wellbeing can ultimately boost their productivity when they return.
  • If the leave request coincides with a slower business period, granting unpaid leave could align with reduced staffing requirements, offering a potential financial benefit.
  • Unpaid leave might give employees a chance to pursue training, education or other professional development opportunities that ultimately benefit your business.
  • Supporting employees by granting unpaid leave requests can improve your workplace culture, leading to increased staff engagement and stronger employee retention rates.

How should employees request unpaid leave?

Employees should submit a formal request for unpaid leave in advance of taking time off. Your company policy, relevant awards, registered agreements or the employment contract should outline the minimum amount of notice needed for an unpaid leave request and request procedure. This could be a specific form, system or preferred method for submitting leave requests.

Often, the process for requesting unpaid leave mirrors that of applying for annual leave. However, it's a good idea for the employee to informally discuss their need for leave with their line manager prior to submitting a formal request. This initial conversation ensures everyone is on the same page and allows for early discussion of potential solutions or accommodations.

Can employers force unpaid leave?

In specific situations, employers can require employees to take unpaid leave – this is termed a "stand down". A stand down is legal only when the employee's employment contract explicitly includes provisions for stand downs, or the company has a demonstrable history of using stand downs and can provide evidence of previous cases.

Stand downs can also be implemented if a specific agreement exists between the company and a relevant trade union regarding this practice or if the employee's contract has been modified to include stand down provisions, with these changes clearly documented in writing.

It's essential to note that stand downs are usually temporary measures during periods of reduced business activity caused by circumstances outside the employer's control, such as equipment failure, industrial action or extreme weather. Generally, the goal is to bring the employee back to work when circumstances improve.

Alternatives to unpaid leave

While unpaid leave can be a valuable tool, it's important to remember that it isn't the only solution when employees need time away from work. Consider these alternatives, which might offer advantages to both employers and employees:

  • Flexible work arrangements - could a temporary adjustment to an employee's schedule or work location address their needs? Flexible arrangements might include part-time hours, job sharing, compressed workweek and remote work.
  • Accrued annual leave - if the employee has accumulated annual leave, using this available paid time off might be the ideal solution.
  • Other paid leave options - depending on the circumstances, the employee might be entitled to a specific form of paid leave outlined in their award, agreement or contract. Examples could include study leave, cultural leave or additional carer's leave.

The best alternative to unpaid leave will vary depending on your business's unique circumstances and the employee's specific needs. Open communication between employers and employees is essential to find a solution that works for everyone.

Remember, some specific scenarios (like compassionate leave) legally mandate unpaid leave and employers are obligated to grant it regardless of potential alternatives.

Employee rights during unpaid leave

When taking unpaid leave, it's essential for employees to understand how it might impact their employment rights. During most types of unpaid leave, your employer is not obligated to continue making superannuation contributions. However, the employee has the option to make voluntary contributions directly to their superannuation fund to maintain their retirement savings.

In most cases, unpaid leave does not break an employee's continuity of service, meaning their employment period continues to accrue during their absence. This can affect entitlements to future paid leave, long service leave and redundancy pay. There may be some exceptions depending on the length of leave and the provisions of your award or agreement.

Generally, the employee has the right to return to the same position you held before commencing unpaid leave. If their previous position is no longer available, you should try to place the employee in a suitable alternative role at the same pay level. It's advisable to review the employee's contract, relevant awards or agreements for specific provisions regarding returning to work after unpaid leave.

If you need further advice on managing unpaid leave and your employer obligations, Employment Compass can provide assistance. Call our 24/7 Employer Assist Line on 1300 144 002 for more information.

Frequently asked questions

Do I have to pay employees for public holidays that fall during unpaid leave?

Generally, there's no obligation to pay an employee for public holidays when they occur during unpaid leave. However, always double-check relevant awards, agreements, or contracts as there might be industry-specific or negotiated exceptions.

What is unpaid community service leave?

Unpaid community service leave enables employees to fulfill responsibilities such as emergency services volunteering, jury duty, or other forms of community service activities mandated by law.

How much community service leave can employees take?

Leave entitlements for community service are often tied to the specific nature of the service. Some forms might involve a set number of days, while others are considered 'reasonable,' requiring case-by-case assessment. Always consult relevant awards and registered agreements.

Can an employer hire a replacement for an employee on extended unpaid leave?

Yes, employers may hire temporary replacements for extended absences. Importantly, the original employee generally retains the right to return to their position, or a comparable position upon expiry of leave.

Are there superannuation implications during unpaid leave?

Typically, employer-mandated superannuation contributions cease during unpaid leave. However, depending on superannuation fund rules, the employee might choose to make voluntary contributions.

What are the notice requirements for requesting unpaid leave?

Notice periods are vital to handling leave smoothly. Check the employee's award, any agreements or company policies as different types of unpaid leave might mandate different notice requirements.

Can my employer deny my request for unpaid leave?

Your employer can legally refuse some unpaid leave requests. This often applies to non-mandated situations like extended travel. However, other leave requests like compassionate leave, carer's leave and some forms of parental leave generally cannot be refused.

What happens if an employee overstays their unpaid leave period?

Returning to work on time is crucial. Unauthorised absences after an agreed-upon unpaid leave period ends might have disciplinary consequences. Refer to your leave policy or employment agreements for guidance on permissible extensions.

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