How unpaid leave works under the Fair Work Act

Almost every small business will eventually field a request for time off without pay. A team member needs to care for a sick parent, has been called for jury duty, wants extra time after parental leave, or simply asks for a month travelling. The legal character of that request matters, because some unpaid time off is a statutory entitlement the employer must grant, while the rest is a discretionary arrangement the employer can approve, condition or refuse.

The National Employment Standards (NES) in the Fair Work Act 2009 (Cth) (the Act) set the baseline. Several NES entitlements operate as unpaid leave: unpaid parental leave, unpaid carer's leave, compassionate leave for casuals, and community service leave. Family and domestic violence leave, once an unpaid category, has been a paid entitlement for most employees since February 2023. Everything outside those categories, such as extended travel or personal reasons, sits in a separate bucket called leave without pay (LWOP), which is purely a matter of agreement.

This article walks through how that framework operates in practice: which categories trigger a legal entitlement, what each one requires from employer and employee, and what unpaid time off does to pay, accruals, service and superannuation. It ends with the areas where a decision can go wrong and where legal advice pays for itself.

The two lanes: NES entitlement versus leave without pay

The single most important distinction is between leave an employee is entitled to take and leave you agree to give. The Act divides unpaid absence along exactly that line:

NES unpaid leave: the employee has a statutory right to take it once the eligibility conditions are met. You can require notice and evidence, but you cannot simply refuse it. This covers unpaid parental leave, unpaid carer's leave, compassionate leave for casual employees, and community service leave.
Leave without pay: no statutory right exists. The employee asks and the employer decides. LWOP covers anything that does not fit an NES category, such as extended travel, study breaks, or extra time after parental leave when the employee has already used their entitlement. You can approve it, decline it, or attach conditions such as a maximum duration or a return-to-work date.

The trap is treating the two lanes the same way. Refusing an NES entitlement outright can be a contravention of the Act with civil remedy exposure, while handling discretionary LWOP requests inconsistently can open the door to adverse action or discrimination claims. The mechanics below show how each lane actually runs.

Unpaid parental leave: the most regulated category

Unpaid parental leave is the NES category with the most moving parts, so it is worth understanding in detail:

Eligibility: An employee is entitled to 12 months of unpaid parental leave associated with the birth of a child of the employee or their spouse or de facto partner, or the placement of a child for adoption, where the employee has or will have responsibility for the care of the child. Non-casual employees must have completed at least 12 months of continuous service immediately before the leave starts. Casuals qualify only if they are regular casuals employed on that basis for a sequence of periods totalling at least 12 months.
Notice and evidence: The employee must give written notice at least 10 weeks before the leave starts, unless that is not practicable. The notice must state the intended start and end dates, and the employee must confirm or vary those dates at least 4 weeks before the start. You can require evidence that would satisfy a reasonable person, including a medical certificate confirming the expected date of birth.
Flexible leave: Since 2020, eligible employees can take up to 100 days of flexible unpaid parental leave in separate blocks during the 24-month period starting on the date of birth or placement. The days come out of the same 12-month entitlement, so the total leave cannot exceed the entitlement. Part-time and casual employees get the full benefit of this option.
Extension: An employee already on unpaid parental leave can request a further period of up to 12 months. The request must be in writing and given at least 4 weeks before the end of the available parental leave period, and the total leave cannot extend beyond 24 months after the birth or placement. The employer must genuinely consider the request, can only refuse on reasonable business grounds, and should respond in writing with reasons.
Return to work: On ending unpaid parental leave, the employee is entitled to return to their pre-parental leave position, or, if that position no longer exists, to an available position for which they are qualified and suited that is nearest in status and pay. If you make a decision that will significantly affect the status, pay or location of the position while the employee is away, you must give them information about it and an opportunity to discuss it. Keeping in touch days, on which the employee performs some work during leave, do not extend the leave period.

Unpaid carer's leave: the everyday category

Unpaid carer's leave is the NES category most small businesses will deal with regularly, because it has no service requirement at all.

An employee is entitled to 2 days of unpaid carer's leave for each occasion when a member of their immediate family or household requires care or support because of a personal illness or injury, or an unexpected emergency. The leave can be taken as a single continuous period of up to 2 days, or in separate periods if you and the employee agree. Critically, the employee cannot take unpaid carer's leave for a period when they could instead take paid personal/carer's leave, so this entitlement operates as a top-up once paid leave is exhausted. Because casuals do not accrue paid personal/carer's leave, they access carer's leave as unpaid only.

You can require reasonable evidence, such as a medical certificate or a statutory declaration, before approving the leave. The evidence threshold is that it would satisfy a reasonable person, not that it proves the case beyond doubt. Set out in a policy how evidence is provided and who handles the information, because the material often touches sensitive medical details.

Compassionate leave: paid for some, unpaid for casuals

Compassionate leave, also called bereavement leave, is available for 2 days per permissible occasion. The occasions are the death of an immediate family or household member, a life-threatening illness or injury to such a member, a stillbirth, or a miscarriage suffered by the employee or their spouse or de facto partner. The leave can be taken as one continuous 2-day period, two single days, or other agreed periods.

The payment rule is where the unpaid dimension appears. Full-time and part-time employees must be paid at their base rate of pay for the period, while for casual employees compassionate leave is unpaid. That asymmetry is worth coding correctly in payroll, because paying a casual for compassionate leave is not required but is also not unlawful if you choose to be more generous.

Community service leave: jury service and emergency volunteering

Community service leave covers two distinct situations: jury service and voluntary emergency management activities.

An employee who engages in an eligible community service activity is entitled to be absent from work for the time engaged in the activity, plus reasonable travelling time and reasonable rest immediately after, provided the absence is reasonable in the circumstances. Voluntary emergency management activities include dealing with an emergency or natural disaster as a member of, or with a member-like association to, a recognised emergency management body, such as a State Emergency Service or rural fire service.

Jury service has its own payment rule, and this is where payroll gets involved. For non-casual employees, the employer must pay the employee's base rate of pay for their ordinary hours during the absence, reduced by the amount of jury service pay the employee receives. The obligation only applies to the first 10 days of absence for a particular jury summons. In practice, that means the employer tops up the difference between jury pay and the employee's ordinary pay for the first 10 days, and can require evidence that the employee has claimed the jury pay they are entitled to. Casual employees receive no payment for jury service.

Family and domestic violence leave: no longer unpaid

It is worth flagging a category that used to appear in unpaid leave guides and no longer belongs there. Since the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) changes took effect in February 2023, most employees are entitled to 10 days of paid family and domestic violence leave in each 12-month period. The leave is available in full at the start of each period, does not accumulate from year to year, and is available in full to part-time and casual employees. If an employee on unpaid leave needs family and domestic violence leave, the paid entitlement should be applied first.

Leave without pay by agreement

When no NES category applies, unpaid time off is a discretionary arrangement. Common examples are extended travel, additional time after parental leave, or personal reasons that do not fit within carer's or compassionate leave. You decide whether to approve it, for how long, and on what conditions.

The risk in this lane is not the decision itself but inconsistency. If you approve LWOP generously for one employee and refuse it for another in materially similar circumstances, and the refused employee has a protected attribute such as family responsibilities, a disability or pregnancy, the decision can be characterised as adverse action. Keep notes of the reasoning behind each decision, tie refusals to legitimate operational needs such as staffing or peak periods, and apply the same policy across the team.

What unpaid leave does to accruals, service and super

Unpaid leave is not a neutral gap in the employment relationship. It has mechanical consequences that are easy to get wrong:

Accruals pause: Annual leave and paid personal/carer's leave accrue according to years of service, and periods of unpaid leave do not count as service. The practical effect, confirmed by the Fair Work Ombudsman, is that most paid leave entitlements do not accrue during unpaid leave. A year of unpaid parental leave therefore does not generate annual leave or sick leave, and does not advance the employee towards a long service leave threshold under the relevant state legislation.
Continuous service survives: An unpaid period does not break continuous service. It simply does not count towards the length of that service for most entitlements. There are important exceptions: approved NES unpaid leave counts towards continuous service for the right to request flexible working arrangements, for unpaid parental leave and related entitlements, and for notice of termination and payment in lieu of notice. So an employee who takes six months of unpaid parental leave comes back with an unbroken employment history, but their service clock for redundancy pay effectively pauses during the absence.
No pay, no super: Superannuation guarantee is calculated on ordinary time earnings. Because an unpaid leave period produces no ordinary time earnings, no superannuation guarantee is payable for those days. The one wrinkle is jury service make-up pay, which is a wage payment and should be handled in payroll accordingly.

Where the framework commonly goes wrong

Three situations trip up employers in practice:

Probation periods: Probation does not suspend the NES. A new employee who qualifies for unpaid carer's leave or community service leave during a probation period must be allowed to take it. For discretionary LWOP, you can weigh whether an extended absence undermines the purpose of the trial period, but you cannot refuse a genuine NES entitlement and must apply any discretion consistently.
Public holidays during unpaid leave: An employee on approved unpaid leave is generally not entitled to be paid for a public holiday that falls within the leave, because they are not on paid leave and would not otherwise have worked ordinary hours. Confirm the position in the approval so there is no surprise at payday.
Leave during a notice period: If an employee who has resigned or been given notice asks for unpaid time off, the NES categories still apply, so a qualifying carer's leave request should be allowed. For discretionary LWOP during notice, decide on legitimate business grounds and be consistent. Because approved unpaid leave does not break service for notice purposes, confirm in writing whether the notice end date moves or stays the same, so the final pay calculation is clear.

Where a lawyer actually helps

Most unpaid leave requests are routine, but the expensive mistakes cluster around parental leave, refusals and documentation. A lawyer's practical role is to check the specific provisions of the applicable modern award or enterprise agreement, which can add entitlements or processes on top of the NES, and to review the leave clauses in employment contracts and policies so that notice periods, evidence requirements, maximum LWOP durations and accrual treatment are all set out before a dispute exists. If you are refusing a parental leave extension, restructuring a position while an employee is on leave, or handling a pattern of inconsistent LWOP decisions, a short advice session on the risks is usually far cheaper than a Fair Work Commission dispute or an adverse action claim.

Getting the mechanics right matters because the stakes are asymmetric. Granting an NES entitlement costs a few days of unpaid absence and builds trust. Refusing one, or handling a discretionary request inconsistently, can convert a simple request into a compliance problem with legal costs attached. A clear written policy, consistent decisions and a payroll system that codes each unpaid leave type correctly are the difference between unpaid leave being a non-event and being a liability.