Leave Without Pay Rules For Employers In Australia

Leave without pay (LWOP) can be tricky for employers to manage. You want to be fair and supportive, but you also need to keep your business running smoothly and stay compliant with Australian employment laws.

In this guide, we’ll walk through when you should consider granting leave without pay, how it affects entitlements like annual leave and superannuation, and the best way to set up a clear policy that protects both your team and your business.

If you’re setting up your approach for the first time or reviewing an existing process, you’re in the right place.

What Is Leave Without Pay (LWOP) In Australia?

Leave without pay is an agreed period when an employee takes time off work and does not receive wages for that time. It’s different to paid leave entitlements (like annual leave or paid personal/carer’s leave), and it’s generally a discretionary arrangement between you and your employee.

LWOP sits alongside other forms of unpaid leave recognised under Australian law, such as unpaid parental leave or community service leave. However, unlike those specific statutory leave types, general LWOP is usually not a legal entitlement-unless an award, enterprise agreement or contract provides for it.

In practice, LWOP is commonly used when an employee has run out of paid leave but needs time off for personal reasons, study, extended travel, or unexpected caring responsibilities. You’ll usually receive a request and decide whether to approve it based on the circumstances and your operational needs.

Do You Have To Approve Leave Without Pay?

Most of the time, you don’t have to approve LWOP. It’s at your discretion unless a relevant instrument (like a modern award, enterprise agreement or contract) says otherwise. That said, it’s important to apply your approach consistently and fairly across your team.

When Approval Is More Likely

• The employee has exhausted paid leave and has a clear reason for the absence.
• Business operations can continue without significant disruption.
• You’ve considered alternatives (for example, partial work-from-home arrangements, roster swaps or reduced hours).

When You Can Refuse

• The timing would cause serious operational issues (e.g. peak trading periods or staff shortages).
• There’s a performance or conduct concern that needs to be addressed first.
• Granting LWOP would conflict with a policy or contractual requirement (assuming that requirement is lawful).

Importantly, decisions must not be discriminatory. Consider the reason for leave carefully-if it relates to a protected attribute (for example, pregnancy or carer’s responsibilities), ensure you’re complying with anti-discrimination laws and any relevant award or agreement obligations.

If the employee is still in their probationary period, you can apply the same discretionary approach, but make sure your process is documented and fair. For context on how leave interacts with probation, see our guide on taking leave during probation.

How Does Leave Without Pay Affect Entitlements?

One of the biggest questions employers have is how LWOP impacts accruals and other entitlements. Here’s a practical overview.

Annual Leave And Personal/Carer’s Leave

Generally, LWOP does not count as service for the purpose of accruing paid leave entitlements (like annual leave or paid personal/carer’s leave). In most cases, an employee on LWOP simply pauses their accruals until they return to paid work.

Keep in mind that some awards or enterprise agreements may specify different treatment, so always check the instrument that covers your employees. If you’re weighing up whether to approve LWOP or suggest using annual leave, this summary of annual leave notice periods may help you plan coverage.

Public Holidays

Employees are generally not entitled to payment for a public holiday that falls during a period of LWOP (as they’re not ordinarily rostered or working paid hours during that time).

Superannuation

Superannuation is usually based on ordinary time earnings. Since there are no wages during LWOP, super typically doesn’t accrue for that period. Some enterprise agreements or employer policies may be more generous-if you choose to continue super contributions during LWOP, document that clearly so it’s applied consistently.

Long Service Leave

Long service leave rules are state and territory based. As a general rule, LWOP often doesn’t break continuity of service, though the unpaid period may not count towards the accrual. Because the detail varies, it’s wise to check the applicable state legislation for your workforce.

Continuity Of Service

LWOP usually won’t break an employee’s continuity of service, but it often won’t count as time served for certain accruals. Again, check the applicable instrument or law if you’re unsure.

How To Set A Clear LWOP Policy (And Apply It Fairly)

A simple, well-drafted policy helps you make consistent decisions and gives employees confidence in the process. It also reduces the risk of disputes down the track.

What To Include In Your Policy

• Eligibility And Discretion: Clarify that LWOP is discretionary unless required by law, award, agreement or contract.
• Application Process: Require requests in writing, with the reason for leave, proposed dates, and any supporting documents (if appropriate).
• Decision Criteria: State factors you’ll consider-business needs, staffing levels, previous leave history, and the reason for the request.
• Entitlements During LWOP: Note how LWOP impacts accruals, public holidays, superannuation and long service leave.
• Communication & Return To Work: Set expectations for keeping in touch during extended leave and confirming return dates.
• Interaction With Other Leave: Explain how LWOP interacts with annual leave, personal/carer’s leave and any statutory unpaid leave (like unpaid parental leave).

It’s best to house your LWOP rules within your broader Workplace Policies, and ensure any commitments align with your Employment Contract. If awards or enterprise agreements apply, weave those requirements into your policy to avoid conflicts.

A Step-By-Step Approach For Managers

1. Receive The Request: Ask for it in writing with dates and reasons.
2. Check Coverage: Review the employee’s contract, award/EA and your policy.
3. Assess Business Impact: Look at staffing, deadlines, and customer obligations.
4. Consider Alternatives: Could paid leave, flexible hours, or a different timing work?
5. Decide And Confirm: Provide a written decision with conditions (if any), and record it in your HR system.
6. Plan The Return: Note any required check-ins and confirm the return date as it approaches.

When the issue is sensitive (for example, complex caring responsibilities, health-related issues or very long absences), it’s prudent to get advice before finalising your decision.

Managing Requests, Risks And Compliance

Approving or refusing LWOP isn’t just an operational call-it has legal and compliance angles. Here are the key areas to manage carefully.

Fair Work Considerations

• Anti-Discrimination: Ensure decisions are based on legitimate business reasons, not protected attributes.
• Consistency: Apply your criteria consistently to avoid claims of unfair treatment.
• Record-Keeping: Keep clear records of requests and decisions (including reasons) to evidence fair process.

Avoid Unlawful Deductions

LWOP means no wages for the unpaid period. Be careful not to make any other deductions from pay unless they are lawful and agreed in writing. If you’re unsure about deductions or timing of final pay, this overview on withholding pay will help you avoid missteps.

Health, Safety And Capacity

If the leave relates to illness or injury, you can request reasonable evidence consistent with the Fair Work framework. For extended absences, you may need to consider your obligations around fitness for work, reasonable adjustments and discrimination. Document your decision-making and seek advice where needed.

Business Continuity

For longer LWOP periods, think about handovers, temporary backfill arrangements, client communication and role continuity. A clear return-to-work plan avoids confusion and helps you hit the ground running when the employee returns.

Overlap With Other Leave Types

Sometimes LWOP is requested in combination with, or as an alternative to, other leave. For example, an employee might want to use up annual leave then move to LWOP. Having clear rules around sequencing and notice makes planning easier. For context on balancing paid and unpaid options, it can help to compare LWOP with unpaid leave more broadly.

Common LWOP Scenarios (And How To Handle Them)

Short Personal Time Off (A Few Days To A Week)

These requests are usually straightforward. Confirm that paid leave has been exhausted and consider operational needs. If you approve, confirm the dates and note the impact on entitlements (typically none accrue during LWOP).

Extended Travel Or Study (Several Weeks Or Months)

Assess timing, coverage, and how the role will be managed during the absence. Set check-in dates for longer periods and get a written confirmation of the intended return date well in advance.

Caring Responsibilities

If the reason involves caring responsibilities, consider whether other leave types apply (e.g. paid personal/carer’s leave, flexible work requests, or extended arrangements under an award/EA). If moving to LWOP, set out what evidence (if any) you’ll need and how often you’ll touch base.

During Probation

You can approve LWOP during probation, provided the treatment is fair and well-documented. Have a clear conversation about how the absence will affect the probation assessment period, and record any agreed extension. For broader context, read more on leave during probation.

Before Resignation Or During Notice

Employees sometimes ask for LWOP when they’ve given notice. You can consider it, but ensure it doesn’t create confusion about the notice end date. If termination arrangements are in play, be mindful of notice and any payment in lieu of notice obligations so there are no surprises in the final pay.

Documents And Processes That Support LWOP

Strong documentation keeps everyone on the same page and reduces risk. Consider the following as part of your LWOP framework.

• Employment Contract: Confirm how unpaid leave is handled, including any reference to awards/EAs. If you’re updating templates, ensure your Employment Contract aligns with your policy.
• Leave Without Pay Policy: Include it within your broader Workplace Policies so processes are consistent and accessible.
• Leave Request Form: A simple form (digital or paper) that captures dates, reasons and manager approval.
• Decision Letter Or Email: Written confirmation of approval or refusal, including conditions and the return date.
• Payroll Notes: Instructions to ensure no wages or super are paid during LWOP (unless your policy provides otherwise), and that accruals are paused as required.

If you manage a large or award-covered workforce, work with HR and legal to make sure your process tracks the relevant instrument and is applied fairly across teams.

Key Takeaways

• Leave without pay (LWOP) is generally discretionary unless an award, enterprise agreement or contract requires approval.
• During LWOP, employees typically do not accrue annual leave or super, and public holidays are usually unpaid; check any applicable instruments and state long service leave laws.
• A clear, written LWOP policy-embedded within your Workplace Policies and aligned with your Employment Contract-helps you apply decisions consistently and fairly.
• Document the request, your assessment, and the decision, and maintain consistent criteria to reduce discrimination and unfair treatment risks.
• Plan for business continuity during extended LWOP and set a structured return-to-work process to avoid operational disruption.
• When LWOP overlaps with other leave types or complex circumstances, get tailored advice early to avoid compliance issues.

If you’d like a consultation on setting up or reviewing your leave without pay approach for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.