Handling unpaid leave requests can be tricky. On one hand, you want to be fair and flexible. On the other, you still need to keep the business running smoothly, and when decisions feel inconsistent or unclear, things can escalate fast.
A recent Fair Work Commission (FWC) case is a good reminder of why a balanced, consistent approach really matters.
A quick recap of the case
A long-term federal government employee requested an extra 2–3 years of unpaid leave to study after already taking 18 months of study leave. She also suggested options like voluntary redundancy or part-time work.
When the employer declined, she resigned and claimed she’d been forced out. The FWC rejected her claim, finding the employer had acted reasonably in refusing the request, especially given her recent extended study leave.
The takeaway?
Unpaid leave decisions can quickly become complicated, so it’s critical to approach every request fairly, consistently and with good documentation.
Below are four key things to keep in mind when you’re assessing unpaid leave requests.
1. When are employers actually required to approve unpaid leave?
Unlike annual leave, unpaid leave isn’t a blanket entitlement. Whether you need to approve it depends on the type of leave being requested.
Under the National Employment Standards, the following forms of unpaid leave must be granted if the employee meets eligibility criteria:
-
Community service leave (mostly unpaid, except jury duty)
-
Unpaid parental leave (up to 12 months, plus a possible extra 12 if approved)
-
Carer’s leave
-
Compassionate leave
Everything else like study leave, extended travel or personal projects is generally up to the employer’s discretion.
The key is to apply your discretion fairly and avoid arbitrary decisions. Even when there’s no strict requirement to approve leave, it may still be reasonable to grant it if:
-
the request makes sense in the employee’s circumstances
-
it won’t unduly disrupt the business
-
it helps retain talent or supports wellbeing
A “reasonableness” mindset goes a long way.
2. Do you need a formal unpaid leave policy?
Not necessarily. What matters more is having a consistent internal process, so decisions aren’t made on the fly.
A simple internal checklist can help. For example:
- What’s the purpose of the leave? Does it make sense in context?
- Is there a wellbeing or professional benefit for the employee?
- Can the business cover their workload without major disruption?
- Is the return date clear and agreed?
If the answers are mostly “yes”, the request is probably workable. If not, you likely have reasonable grounds to decline.
This approach lets you be fair and transparent without locking yourself into rigid rules.
3. How does unpaid leave affect entitlements?
Many employees don’t realise unpaid leave can impact things like:
-
superannuation: contributions typically pause unless you choose to continue them
-
annual and personal leave accruals: these usually stop
-
long service leave accruals: depend on the applicable state legislation
It’s important to explain these impacts upfront so there are no surprises later.
Study leave can also lead to conversations about pay and progression. If an employee is gaining valuable skills that benefit the business, prepare managers for those discussions when they return.
4. How do you stay fair when some requests are approved and others aren’t?
This is a big one. Inconsistent decisions can spark discrimination or adverse action claims.
To protect the business:
-
document your reasons for approving or declining every request.
-
explain decisions clearly to the employee, first in conversation, then in writing.
-
avoid comparing employees or discussing other people’s arrangements.
-
state clearly that each request is assessed case-by-case, so no precedent is set.
Good documentation and clear communication remove ambiguity and help you show that decisions were made fairly and reasonably.
The bottom line
Unpaid leave requests don’t need to become legal headaches. With a consistent process, clear communication and a focus on reasonableness, employers can support their people while still protecting business operations.
If you’d like help reviewing your approach or assistance on how to respond to these requests, we’re here to support you.