Unpaid leave can be confusing - for employers and employees alike. If you’re an employer trying to balance operational needs with genuine personal circumstances, or an employee weighing up time off when paid entitlements are low, it helps to be clear on how unpaid leave actually works under Australian law.
In this guide, we’ll break down the main types of unpaid leave recognised by the Fair Work Act 2009 (Cth), how “leave without pay” by agreement fits in, what happens to annual leave accrual and continuous service, and the practical steps to manage requests fairly and lawfully.
By the end, you’ll understand your rights and responsibilities - and how a clear policy and sound process will keep everyone on the same page.
What Is Unpaid Leave?
Unpaid leave (often called leave without pay or LWOP) is an authorised absence from work where the employee is not paid wages for the period away. It can arise because the National Employment Standards (NES) grant a specific unpaid entitlement (for example, unpaid parental leave), or because an employer and employee agree to unpaid time off for other reasons (for instance, after paid leave is exhausted).
Common scenarios include:
- Taking unpaid parental leave following the birth or adoption of a child.
- Needing time away to care for a family or household member when no paid personal/carer’s leave is available.
- Compassionate circumstances (noting the paid/unpaid status depends on the employee’s type).
- Study, travel, religious observance or other personal reasons agreed with the employer.
Outside specific NES entitlements, whether LWOP is approved is generally a matter of agreement. That’s why a consistent internal process and a clear workplace policy are so important.
Which Types Of Unpaid Leave Does The Fair Work Act Cover?
The Fair Work Act sets minimum standards that apply nationally. Below are the main categories that commonly come up, with important nuances for each.
Unpaid Parental Leave (NES)
- Eligible employees are entitled to up to 12 months of unpaid parental leave, with a right to request a further 12 months (up to a total of 24 months) in certain circumstances.
- Eligibility requirements apply (for example, minimum service and notice). If those are met, this is a workplace right - it cannot be refused on unlawful grounds.
- Government-funded Parental Leave Pay is a separate payment system and does not convert unpaid parental leave into paid leave at the employer’s expense.
Many workplaces also implement a tailored Parental Leave Policy to clarify eligibility, notice and return-to-work steps.
Carer’s Leave When Paid Entitlements Are Exhausted
- Full-time and part-time employees accrue paid personal/carer’s leave. If the paid balance is exhausted, employees are entitled to 2 days of unpaid carer’s leave per permissible occasion to care for an immediate family or household member (evidence may be required).
- Casual employees do not accrue paid personal/carer’s leave, but they do have access to 2 days of unpaid carer’s leave per occasion when needed.
When paid sick or carer’s leave runs out, managing ongoing absences fairly can be tricky. It helps to set expectations in your policies and support this with your Employment Contract.
Compassionate Leave
- Full-time and part-time employees are entitled to 2 days of paid compassionate leave per permissible occasion (for example, when a member of the employee’s immediate family or household dies or suffers a life-threatening illness or injury).
- Casual employees are entitled to 2 days of unpaid compassionate leave per permissible occasion.
This entitlement sits alongside (and does not replace) other leave categories. Employers can seek reasonable evidence, handled sensitively.
Family And Domestic Violence Leave
- All employees (including casuals) now have access to 10 days of paid family and domestic violence leave in each 12-month period, under the NES.
- This replaced the previous unpaid entitlement. The paid entitlement includes confidentiality protections and strict record-keeping rules.
- Employees are entitled to be absent for certain community service activities, such as eligible jury service and voluntary emergency management activities.
- Jury service includes some paid components (for example, make-up pay obligations), whereas other community service leave is generally unpaid.
Leave Without Pay By Agreement (Discretionary LWOP)
- Outside the specific NES categories above, employees may request leave without pay for personal reasons (study, travel, extended holidays, religious observance, etc.).
- There’s no general legal right to this type of LWOP. Approval is at the employer’s discretion unless an award, enterprise agreement or contract sets otherwise.
- It’s wise to document what’s agreed (dates, conditions, any impact on entitlements) and to apply requests consistently.
For a practical employer overview of “leave without pay”, see this quick guide on leave without pay rules.
How Does Unpaid Leave Affect Accruals, Service And Super?
A key area of confusion is what happens to other entitlements when someone takes time off without pay. Here are the main rules to keep in mind.
Does Annual Leave Accrue During Unpaid Leave?
- As a general rule, annual leave does not accrue during periods of unpaid leave or unpaid authorised absence under the Fair Work Act, other than during certain community service leave.
- Unpaid parental leave does not accrue annual leave.
- Government Parental Leave Pay (received from Services Australia) doesn’t change the accrual position.
- Where an employer offers employer-funded paid parental leave or other paid leave under a contract or industrial instrument, whether annual leave accrues during that period depends on the instrument’s terms and whether the period counts as service - check the wording carefully.
If you’re planning an extended break, factor in that annual leave balances won’t grow during unpaid periods. For a refresher on how annual leave works day-to-day, this overview on annual leave payments is a helpful starting point.
Does Unpaid Leave Count As Continuous Service?
- Under the Fair Work Act’s service rules, most unpaid leave does not count as service for the purpose of accruals and some entitlements.
- However, authorised unpaid leave generally does not break an employee’s continuous service. There are exceptions - for example, certain types of unpaid absence that extend beyond a period (commonly referenced as 3 months) or unauthorised absences can impact continuity. The detail can vary with the law and any applicable agreement.
- The safest approach: treat authorised LWOP as not counting for accrual, keep continuity intact unless an instrument or the Act says otherwise, and get advice if a long unpaid absence is proposed.
Documenting LWOP as “authorised” and recording start/end dates reduces the risk of confusion later - particularly for long service leave and redundancy calculations under applicable laws.
Is Superannuation Payable During Unpaid Leave?
- Superannuation contributions are generally calculated as a percentage of ordinary time earnings. During unpaid leave, no wages are paid, so no superannuation is ordinarily required for that period.
- If your workplace has a policy to pay an allowance or top-up during a leave period, check the super rules carefully or speak with your payroll adviser to confirm whether those payments attract super.
Approving And Managing Leave Without Pay (For Employers)
Approving unpaid leave is often a balancing act - genuine personal needs versus business continuity. A consistent framework helps you make fair calls and stay compliant.
Build A Clear Policy
- Outline eligibility, how to apply (notice and forms), evidence requirements, and decision-making criteria (operational impact, staffing levels, prior leave, etc.).
- Explain the effect of LWOP on entitlements (annual leave accrual, super, long service leave), and any conditions (for example, check-ins during long absences).
- Reference any award or enterprise agreement provisions that apply in your industry.
Most businesses include an unpaid leave section within a broader handbook. If you’re formalising your approach, consider rolling this into a practical staff handbook supported by a tailored Workplace Policy.
Use A Consistent Process
- Require written requests that state the reason and dates. Confirm approvals in writing, including any conditions.
- Seek reasonable evidence for carer’s or compassionate circumstances. If you’re unsure when evidence is appropriate, this guide on requesting medical certificates outlines good practice.
- Record LWOP accurately in your payroll system so accruals and super aren’t unintentionally applied.
Apply Your Decision-Making Fairly
- Be consistent in how you treat similar requests. Inconsistency invites grievances.
- Do not refuse LWOP for discriminatory reasons (for example, pregnancy, family responsibilities or religion). Consider reasonable adjustments where feasible.
- When in doubt, discuss options with the employee (staged return-to-work, partial hours, or a different leave mix) so you can balance business needs and fairness.
Where absences relate to injury or illness, it can intersect with fitness for work and safety obligations. If paid entitlements are exhausted, these tips on managing sick leave when entitlements run out can help you navigate next steps.
Common Scenarios And FAQs
How Much Unpaid Leave Can I Take?
It depends on the type of leave and the reason:
- Unpaid parental leave is set by the NES (up to 12 months, with a right to request a further 12 months if eligible).
- Unpaid carer’s leave is 2 days per permissible occasion when you don’t have paid personal/carer’s leave available (casuals can access this too).
- Compassionate leave is 2 days per permissible occasion - paid for non‑casuals and unpaid for casuals.
- Other LWOP is by agreement. There’s no general cap in the Act, but employers can consider operational impact and any limitations set in an award or enterprise agreement.
Can An Employer Refuse A Request For Unpaid Leave?
For NES entitlements (for example, unpaid parental leave where eligibility is met), the employer cannot lawfully refuse. For discretionary LWOP, the employer can refuse on reasonable business grounds - but must not do so for unlawful reasons (such as discrimination). Clear criteria in your policy help here.
Does Unpaid Leave “Break” Continuous Service?
Generally, authorised unpaid leave does not break continuous service, even though it doesn’t count as service for accruals. However, long periods of unpaid absence, or unauthorised absences, can affect continuity depending on the circumstances and the law. If an employee proposes an extended LWOP (for example, beyond several months), get advice on how it interacts with service calculations in your jurisdiction and instrument.
Can I Take Unpaid Leave During Probation?
Yes, but it’s subject to approval and business needs unless it’s an NES entitlement. Time away on unpaid leave during probation won’t usually count towards service. If you’re weighing options, these points on taking leave during a probation period outline what to consider.
Can You Be Dismissed While On Unpaid Leave?
Employees are protected from adverse action for exercising workplace rights (for example, taking eligible unpaid parental leave). Termination for a legitimate reason unrelated to the leave (for example, genuine redundancy or serious misconduct) is possible in limited circumstances - proceed cautiously and seek advice.
Do Casual Employees Get Unpaid Leave?
Casuals have access to certain unpaid NES entitlements (for example, unpaid carer’s leave and unpaid compassionate leave). They can also request LWOP by agreement for other reasons. The paid family and domestic violence leave entitlement applies to casuals as well.
What Internal Documents Help Manage LWOP?
At a minimum, ensure you have robust contracts and policies that align with the NES, any award and your operations. A practical set-up includes an Employment Contract, a clear Workplace Policy or handbook, and a tailored Parental Leave Policy if you have a growing team. If you prefer a consolidated approach, Sprintlaw’s Staff Handbook Package can bring these together in one place.
Key Takeaways
- Unpaid leave is an authorised absence without wages - it can be an NES entitlement (for example, unpaid parental leave) or a discretionary arrangement by agreement.
- Carer’s leave when paid balances are exhausted is 2 days of unpaid leave per permissible occasion, and compassionate leave is paid for non-casuals and unpaid for casuals.
- Annual leave generally does not accrue during unpaid leave, and most unpaid leave does not count as service - but authorised LWOP typically doesn’t break continuous service.
- Employers should apply a consistent process, keep accurate records, and avoid discriminatory decisions when considering LWOP requests.
- A clear policy and strong contracts make LWOP easier to manage and reduce the risk of disputes, especially during longer absences or probation.
- If extended unpaid leave is on the table, check how it interacts with awards, enterprise agreements and the Fair Work Act before you decide.
If you’d like a consultation on unpaid leave obligations or to put in place practical workplace policies, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.
