Payroll Bulletin 9

LEAVE WITHOUT PAY

When there is a public holiday in a leave without pay period

Leave without pay is a type of unpaid leave employers may offer to employees if both parties agree. An employee may request leave without pay if they wish to take an extended holiday and do not have enough annual leave accrued, or for a personal matter which is not covered by any other type of official leave.

While an employer does not have to pay wages to an individual who takes unpaid leave, it is important to note that leave without pay does not mean termination of employment, and some other entitlements may still apply.

Agreeing to unpaid leave between employers and employee

Employers are not obliged to provide unpaid leave to their employees, and the leave only becomes official if both parties agree.

How unpaid leave affects annual leave entitlements.

Employees receive their annual leave entitlement one full year after starting employment. If an employee takes unpaid leave that is longer than one week, there are two options for employers:
•  An employer may choose to exclude the unpaid leave from the 12-month entitlement period. This means if an employee takes more than 1 week (eg. 3 weeks) of unpaid leave, the date they receive their annual leave entitlements will push out to one year and 2 weeks from the date they started employment. 
• An employer may choose to disregard the unpaid leave, and give an employee their full annual leave entitlement after 12 months, regardless of any unpaid time taken. If the employee then takes annual leave, when calculating gross earnings for the 52 weeks prior to the period of annual leave, if the employee took a period of unpaid leave which was for a duration of more than 1 week within that period, the employer would reduce the divisor of 52 by the number of weeks more than 1 week that the employee took as unpaid leave. For instance, if the employee took a period of 3 weeks unpaid leave, the divisor would be reduced to 50.

What is an employee entitled to during leave without pay?

During unpaid leave an employee would not receive any public holiday pay, sick leave or bereavement leave. Benefits are calculated based on the question of whether that day is employee’s normal working day. If so, the employer is obligated to pay the employee.

For example, if an employee is on unpaid leave because he is sick and doesn’t have enough sick leave, a public holiday during this period would be a day he would ordinarily work. In this case, he would be entitled to payment for the public holiday.

On the other hand, if an employee is on unpaid leave because he is just taking a long holiday, a public holiday during this time would not be considered a day he would usually work. In this case, he would not be entitled to payment for the public holiday

Source of information

https://www.employment.govt.nz/leave-and-holidays/other-types-of-leave/leave-without-pay

https://employsure.co.nz

If you have any questions or need further information, please don't hesitate to contact Olga at olga@topflight.co.nz