Unpaid leave is when an employee takes time off work without pay, often used as an alternative to layoffs or reducing hours. It can be temporary or periodic, and is sometimes granted at the discretion of the company or government organization. It can be used to manage budget shortfalls, but may result in decreased productivity.
Going unpaid is exactly what it sounds like, a situation where an employee takes time off work without getting paid. This is contrasted with days off paid leave, such as vacation or sick days, and is also contrasted with actually being fired or placed on indefinite leave. It is generally assumed to be a temporary condition, although it may occur periodically on a pre-established schedule, for a variety of reasons. In contracts and technical documents, it can be simply abbreviated as LWOP.
As the economy weakens, many companies turn to walk away without pay to make up for balance sheet shortfalls. While in the long run, having employees take time off can mean less productivity and a recession, in the short term, it may be necessary if there simply aren’t the funds to continue paying employees for their full-time work. The hope is generally that as the temporary situation improves, employees will no longer be asked to take days off without pay, ensuring a seamless return to the way things were before the recession.
In this way, this type of leave can be seen as an alternative to laying off employees or reducing full-time employees to part-time. Leaving Without Pay accomplishes much the same thing, but does it in a less demanding and less permanent way. Furthermore, it is generally less traumatic for employees to ask to take a few days off each month than to be told their hours are being cut or they are being laid off until the company recovers.
Employees can also request to take free leave, depending on their personal circumstances. In jobs that do not include vacation time or sick leave, an employee may take time off to travel or if unable to go to work. Or an employee may have already used up paid leave days and still need time off. In this case, the granting of leave is at the discretion of the company and, of course, depends entirely on the circumstances of the company and the role played by the employee.
Government organizations generally have policies in place that manage this leave when requested by employees. Usually, different agencies are able to handle individual leave requests within their departments, but there are some situations where an employee may receive this type of leave. These situations depend on the organization, but may include veterans in need of medical care, employees who have service time in uniformed services, or during certain family and medical emergencies.
Political institutions can also use compulsory unpaid leave to manage budget shortfalls. For example, in February 2009, the state of California ran into a severe budget shortage and therefore ordered all employees to take two days off without pay each month. This meant that a number of government offices, from the Department of Motor Vehicles to the Governor’s Office of Emergency Services, were closed. While generally contested by government employees, it offered a quick and easy way for government entities to save desperately needed funds in a time of crisis.
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