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Managing LEAVE WITHOUT PAY (LWOP)

Leave Without Pay (LWOP) will become a can of worms if not managed well. It is vital to document LWOP and any agreement on LWOP in order to meet your obligations, but also to keep a good record of your employee’s leave and specifically LWOP. Make sure that if an employee requests time off work on leave without pay that they are clear on the basis of that time off. Agreeing to the time off and stating the type of leave in writing will leave less room for misunderstanding.

If your employee is taking more than one week of LWOP (which doesn’t include unpaid sick leave or unpaid bereavement leave):

1. Their anniversary date for entitlement to annual holidays moves out by the amount of unpaid leave taken (not including the first week). This means the employee becomes entitled to their annual holidays later each year from then on, or

2. The employer can agree with the employee that their anniversary date for annual holidays entitlement won’t change. If they agree to this, the employer must also reduce the divisor for calculating average weekly earnings for annual holidays by the number of weeks or part weeks greater than one week that the employee was on leave without pay.


To put it is more simple terms, if your employee is going on LWOP for more than one week, you should:

· discuss with them that there will be an impact on their anniversary date or

· you will need to seek agreement to keep their anniversary date for annual holidays the same and reduce the divisor for calculating average weekly earnings – this means that your business will not suffer any continued accrual of leave while the person is on their LWOP.


Get in touch with your payroll expert for more info or contact The HR Guy:


M: 021 543 510

E: dylan@thehrguy.nz

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