Leave Without Pay (LWOP) is a period of unpaid absence agreed between an employer and employee. Like any other leave type in Tempus, it should be submitted as a leave application rather than keyed directly into a timesheet — see Leave Management Overview for the full workflow: Leave Application >> Leave Entries in Timesheet >> Timesheet data flows to Pay run. Skipping the leave application loses the audit trail of who requested the leave, who approved it, and any supporting notes, none of which can be recovered once the entry sits only in the timesheet.
What makes LWOP different from most other leave types is that it can affect the date an employee's Annual Holidays entitlement next arises. Under the Holidays Act 2003, entitlement to 4 weeks' Annual Holidays arises after each completed 12 months of "continuous employment", and a sufficiently long period of LWOP can interrupt that continuity, pushing the employee's entitlement date out.
Tempus has two Leave Without Pay categories on the leave application for exactly this reason: one that applies the default statutory effect on the entitlement date, and one that excludes it. Selecting the wrong one when the application is raised silently changes when an employee becomes entitled to their next 4 weeks of Annual Holidays.
⚠️ Important: A period of Leave Without Pay of 1 week or less can never move an employee's Annual Holidays entitlement date. The Holidays Act 2003 only allows the date to move for LWOP of more than 1 week.
Section 16 of the Holidays Act 2003 sets out what counts towards an employee's 12 months of "continuous employment" for Annual Holidays purposes. Continuous employment automatically includes paid leave, Parental Leave, time receiving ACC weekly compensation, and unpaid sick, bereavement or family violence leave. It also automatically includes any other unpaid leave — including LWOP — of no more than 1 week.
Beyond that 1 week, the Act treats LWOP differently. Unless the employer and employee agree otherwise, a period of LWOP longer than 1 week is not counted as continuous employment, and the employee's entitlement date is pushed out by however much of the LWOP exceeds the first week. For example, an employee who takes 3 weeks of LWOP has their entitlement date pushed out by 2 weeks.
The employer and employee can instead agree, in writing, that the entitlement date will not move. If they do, the LWOP is treated as continuous employment, but the extra weeks are removed from the divisor used to calculate the employee's average weekly earnings when Annual Holidays are eventually paid, so the unpaid weeks do not dilute the employee's holiday pay.
Tempus offers two leave categories to record LWOP on a leave application, matching the two outcomes the Act allows for a period longer than 1 week:
"Leave without pay"
Applies the default statutory outcome. If the approved period is longer than 1 week, the employee's Annual Holidays entitlement date moves out by the number of weeks over 1.
"Leave without pay - (excluding annual holidays)"
Excludes the period from affecting the entitlement date. The employee's Annual Holidays entitlement date stays where it would otherwise have been.
Both categories can be applied to an absence of any length, but the Act only gives them different outcomes once the absence passes 1 week. Below that threshold, they behave identically, because the law does not permit the date to move at all.
Select the leave category at the point the leave application is created, not afterwards in the timesheet. An employee can submit their own request, or you can raise one on their behalf: select Leave >> Manage Requests, then use the "Create Leave Request" button. Once approved, the application generates the corresponding leave entries in the timesheet automatically, and that timesheet data is what flows to the pay run.
Two reasons this matters for LWOP specifically, beyond the general recommendation to always use a leave application:
The Holidays Act 2003 only allows the "excluding annual holidays" outcome for LWOP of more than 1 week where the employer and employee have agreed to it. The notes on a leave application are a natural place to record that agreement, so there is evidence of it if the entitlement date is ever queried.
Editing a timesheet entry directly, after the fact, leaves no record of who decided which category applied or why. If a client later asks why an employee's entitlement date has or has not moved, the leave application is what answers that question.
LWOP of 1 week or less
Always select "Leave without pay - (excluding annual holidays)".
The entitlement date cannot move under the Act regardless of which category looks correct at a glance, so the excluding option is the only one that reflects the legal position.
LWOP of more than 1 week
Check whether the employer and employee have agreed what happens to the entitlement date, and record that agreement in the leave application notes.
If they have agreed the date will not move, select "Leave without pay - (excluding annual holidays)".
If there is no such agreement, select "Leave without pay" and let the entitlement date move out by the number of weeks over 1, as the default rule requires.
A short absence is the case most often applied for incorrectly, because "Leave Without Pay" reads as though it should always be the plain "Leave without pay" category. An employee away for only 3 or 4 days, for example, should still be submitted against "Leave without pay - (excluding annual holidays)", because the Act does not allow that short an absence to affect their entitlement date at all.
⚠️ Note: This article provides a general overview of Leave Without Pay principles under the Holidays Act 2003. If you have any questions relating to a specific employee's agreement or your legal obligations, please raise this with your payroll contact or seek employment relations advice.
🌐 Employment New Zealand | Leave Without Pay
Always submit Leave Without Pay as a leave application, never key it directly into the timesheet — this keeps the Leave Application >> Leave Entries in Timesheet >> Pay run workflow and its audit trail intact.
LWOP of 1 week or less never moves the Annual Holidays entitlement date — select "Leave without pay - (excluding annual holidays)" every time.
LWOP of more than 1 week moves the entitlement date by default, unless the employer and employee have agreed in writing to keep it unchanged.
Record that written agreement in the leave application's notes, and select "Leave without pay - (excluding annual holidays)" to match; otherwise select "Leave without pay" and let the default rule apply.
If you have any questions relating to a specific employee's situation, please raise this with your payroll contact, who will aim to assist you.