Leave Without Pay Guide

Leave without pay (also called unpaid leave, leave of absence, or LWOP) is time off work where an employee is not paid. It’s not an automatic right. In New Zealand, whether someone can take leave without pay depends on agreement between the employer and the employee. 

When used well, leave without pay gives flexibility for personal situations, long travel, study, or caring responsibilities. But it also brings risks, for both employer and employee, so it needs clear agreement and proper handling.

In this guide you’ll learn:

• What the rules are in NZ for leave without pay
• How LWOP interacts with annual holidays, public holidays, sick leave

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Understanding Leave Without Pay in NZ

Is Leave Without Pay an Entitlement?

No, employees don’t have an automatic right to take leave without pay. It must be mutually agreed between both parties. If someone takes time off without permission, it becomes unauthorised absence, which can be treated as misconduct.
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Common Reasons for Taking Leave Without Pay

People often request LWOP for:

• Personal travel or family commitments
• Study or training courses
• Extended recovery after sick leave
• Caring for a family member
• Taking time off after using up paid leave

LWOP can also occur during a business closedown period if an employee doesn’t have enough annual leave to cover the shutdown.
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How Leave Without Pay Affects Other Entitlements

Under the Holidays Act 2003, employees qualify for four weeks of annual holidays after 12 months of continuous employment.

If someone takes more than one week of continuous LWOP, the employer must either:

1. Move the employee’s anniversary date for annual holiday entitlement, or
2. Keep the same anniversary date but adjust the divisor (normally 52 weeks) used to calculate average weekly earnings (AWE) for holiday pay.

For example, if an employee takes four weeks of LWOP, the employer can reduce the divisor by three weeks (the LWOP period beyond the first week).
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Public Holidays and Sick Leave

Public holidays that fall during a period of LWOP are generally not paid, because the employee would not normally be working that day. Similarly, employees don’t accrue or use sick leave, bereavement leave, or family violence leave during unpaid leave.
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Key Takeaways for Employers and Employees

• Leave without pay must always be agreed by both parties and clearly documented.
• Employers should record LWOP accurately to stay compliant with the Holidays Act 2003
• Employees do not earn leave or get paid for public holidays during unpaid leave.
• Continuous LWOP beyond one week affects holiday calculations; either move the anniversary date or adjust the average earnings divisor.
• Taking unauthorised leave can lead to disciplinary action, so communication and written approval are essential.
• For long unpaid absences, keep in touch and confirm return-to-work plans early.
• Having a consistent LWOP policy helps build fairness, transparency, and trust in your workplace.

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