Setting up leave without pay (LWOP) - NZ only

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This page explains how to set up and manage leave without pay (LWOP) in MYOB Advanced Payroll.

LWOP is a type of unpaid leave where an employee takes time off work when they would otherwise be working. Although employees can request LWOP at any time, they are not entitled to it. Approving LWOP depends on the employee's contract – if it's not outlined in their contract, it's up to your discretion as their employer. You can even negotiate LWOP agreements with your employee when they request leave.

It is strongly recommended to record the LWOP agreement in writing. Who's recommending this? Is it just us? I don't believe we're meant to give business advice in the help. We're just meant to tell them how to use the product.

While you don't need to pay wages to an employee who takes unpaid leave, it is important to note that leave without pay does not mean an employee is terminated, so some other entitlements might still apply. However, LWOP can affect the employee's annual holidays payment and entitlement in some situations.

An employee might request LWOP when they:

don't have enough annual leave to cover the time they want to take off work
don't have enough sick leave to cover a period of illness or injury
want to continue their education
go on sabbatical
can’t take parental leave or negotiated carer leave.

For more information, see the Holidays Act 2003 on the New Zealand Legislation website and MBIE guidance.

Setting up MYOB Advanced to handle LWOP

There's a few steps involved in setting up MYOB Advanced to handle LWOP.

Ensure your annual leave entitlement caps employee accrual per period.

This prevents the employee from earning more than the entitled number of weeks at rollover, especially when trying to move the employee's anniversary date.

Create an LWOP entitlement.

Create an LWOP pay item.

Set up MYOB Advanced to handle LWOP.

If an employee takes more than one week of continuous LWOP (excluding unpaid sick or unpaid bereavement leave), then you and your employee can agree to one of two options:

If LWOP isn't considered a continuous employment, postpone the employee's holiday anniversary.
If LWOP is considered a continuous employment, reduce the divisor for calculating average weekly earnings (AWE).

To cap annual leave accrual per period

Go to the Entitlements screen (MPPP3300).
In the Entitlement ID field, select your annual leave entitlement.
On the Rules tab, select the Cap accrual per period checkbox.
On the form toolbar, click the Save icon ().

To create an LWOP entitlement

Go to the Entitlements screen (MPPP3300).
On the form toolbar, click the Add New Record icon ().
Complete the Entitlement ID and Description fields. Make sure you give the entitlement a relevant ID, like "LWOP".
On the Rules tab, in the Definition section, select the Units option and select Weeks from the dropdown.
In the Properties section, select the Leave and Non Accruing Entitlement checkboxes.
On the form toolbar, click the Save icon ().

Postponing the employee's annual leave anniversary

The employee's anniversary date for entitlement to annual holidays is postponed by the amount of unpaid leave taken (excluding the first week). From them on, the employee becomes entitled to their annual holidays later each year.

This is the default option. In what was is it the default? If these are workarounds, the system can't "default" to this or automatically do it, right? Do you mean it's what we recommend they do?

To postpone the employee's anniversary date

Manually calculate the number of weeks the employee was on LWOP, as per the Holidays Act 2003 guidance.

See Leave without pay on the MBIE website.
Adjust

Reducing the divisor for average weekly earnings

You can agree with the employee that their anniversary date for annual holidays entitlement won’t change. In this case, you must reduce the divisor for calculating average weekly earnings (AWE) for annual holidays by the number of weeks or part weeks greater than one week that the employee was on leave without pay

For example, two and half weeks of LWOP means the divisor should be reduced by two weeks excluding the initial one week, so gross earnings are divided by 50 weeks instead of the usual 52 to calculate AWE).

The following kinds of unpaid leave are exempt from this: unpaid sick leave, unpaid bereavement leave, unpaid parental leave, voluntary service and leave on ACC. For these leave types, you don't need to adjust the employee's anniversary date or AWE divisor. For more information, see Leave Without Pay on the MBIE website.

To reduce the divisor for average weekly earnings

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