What is Unpaid Leave

It is a time off from work with pay which is provided to the employees. When an employee is granted  or takes unpaid leave, he or she retains the position in the company, but he or she receives no salary. There are various reasons to take this of leave. But before applying or taking this kind of leave an employee must talk to his or her human resource executive and read the employee hand book provided to them at the joining the company.

Many companies offer unpaid leave as a substitute for paid leave. For example a company may allow its employees to take a paid leave for a week every year and allow them to take three week additional time off without pay, thus creating a month of combined time off. Unpaid leave may also be allotted to employees who need to take sick days off.

In some companies due to cost cutting may apply a rule for the employees to go on unpaid leave. This tactic is designed to retain employees to company’s critical period especially during economic hardship. The advantage of unpaid leave is that the employees can take leave with out losing their jobs. But this also has a disadvantage; an unpaid leave of absence can affect the employee’s benefits. An employee has two options whether the unpaid leave falls under family and medical leave or other leave provisions.

  • Continue your coverage for the duration of you unpaid leave absence by making it from personal payments. The employer’s contribution of premium amount will continue on or after the employee returns to work.
  •  Let the coverage lapse. The employee has an option to reapply for benefits plan within 30 days of returning back to work. The employer’s contribution will resume after the payroll department has received the employee’s application.

Certain companies have a dependent care leave policy under the unpaid leave option.  There is a statutory requirement to allow the employee’s a reasonable amount time off:

  • To provide assistance when a dependent gives birth, falls ill and or is injured.
  • In consequences of death of the dependent.
  • In case of unexpected termination of care arrangements of dependents.
  • Maternity leave for female employees is also considered unpaid leave, unless the employee has accrued time.

The time off must be for necessary actions and the employee should tell the company valid reasons for his or her absence and also how long he or she expects to be absent.

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