Unpaid Time Off Policy: When to Allow Leave Without Pay (Free Template)
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Quick Answer
An unpaid time off policy explains when employees may take leave without pay, who is eligible, how to request it, how long it can last and how it affects PTO, benefits and pay. Most employers require employees to use available PTO first, approve unpaid time off case by case based on business needs and track it separately from paid leave. Unpaid leave that is legally protected, such as FMLA leave, must be handled under those laws. For exempt employees, federal rules generally allow salary deductions only for full-day absences, so check the rules before docking pay.
Sooner or later, an employee asks for time off they don't have. A new hire hasn't accrued PTO yet and has a family wedding. A long-time employee used all their vacation and needs a week for a move. Someone wants a month off to care for a parent. Without an unpaid time off policy, every request becomes a one-off decision, and similar requests get very different answers.
An unpaid time off policy sets clear rules for leave without pay: when it's allowed, how to request it and how it affects pay, PTO and benefits. This guide explains how to write one, how unpaid time off works with paid and protected leave, the pay rules for exempt employees and how to track it, with a free unpaid time off policy template and request form. It is general information, not legal advice; leave laws vary by state and city.
What Is Unpaid Time Off?
Unpaid time off, also called leave without pay (LWOP), is approved time away from work for which the employee isn't paid. It can be a few hours, a day or several weeks. It's different from paid time off, which draws from an accrued balance, and from protected leave, which the law requires you to allow in certain situations.
| Type of leave | Paid? | Required by law? | Who decides |
|---|---|---|---|
| PTO or vacation | Yes | Not under federal law; your policy | Employer policy |
| Paid sick leave | Yes | Required in many states and cities | Law plus policy |
| FMLA leave | Unpaid (PTO may be used) | Yes, for covered employers and eligible employees | Law |
| Unpaid time off (discretionary) | No | No | Employer, case by case |
| Other protected leave (jury duty, military, voting) | Varies | Yes, under federal or state law | Law |
See the leave of absence policy template and PTO accrual explained.
Why You Need an Unpaid Time Off Policy
- Consistency. Similar requests get similar answers.
- Fairness. Employees know the rules before they ask.
- Coverage. Managers can plan for absences.
- Legal protection. A written policy helps show decisions weren't discriminatory or retaliatory.
- Payroll accuracy. Everyone knows how unpaid time is recorded and paid.
- Retention. Flexibility helps keep good employees through life events.
When to Allow Unpaid Time Off
| Common reason | Typical approach |
|---|---|
| New employee with no PTO yet | Allow limited days with notice |
| PTO balance used up | Allow case by case based on coverage |
| Family events, weddings, moves | Allow with advance notice |
| Personal or family emergencies | Allow quickly, with documentation later if needed |
| Religious observances | Consider accommodation obligations |
| Extended personal leave | Approve in writing with return date |
| Slow business periods | Voluntary unpaid time off offered to employees |
Some requests aren't really discretionary. If the absence relates to the employee's own serious health condition, a family member's care, a disability, pregnancy, military service or another protected reason, it may be covered by law. When in doubt, check with HR or an employment attorney before denying it.
Free Unpaid Time Off Policy Template
Unpaid Time Off Policy
Purpose: This policy explains when employees may take unpaid time off (leave without pay).
Eligibility: All [regular full-time and part-time] employees may request unpaid time off. [Employees in their introductory period may request up to (X) days.]
Use of PTO first: Employees must use available [vacation / PTO] before unpaid time off is approved, unless the law provides otherwise or management approves an exception.
Requests: Submit requests in [app / form] at least [X days] in advance, except in emergencies. Include dates and the reason, if you choose to share it.
Approval: Requests are approved based on business needs, coverage and the employee's attendance record. Approval is not guaranteed.
Length: Unpaid time off is generally limited to [X days] per [year]. Longer leave requires approval from [title] and a written return date.
Protected leave: Leave protected by law, such as FMLA, state family or sick leave, military leave or jury duty, is handled under those laws and this policy does not limit it.
Pay and benefits: Unpaid time off is not paid. Benefits and PTO accrual during extended unpaid leave are handled as described in [benefits policy].
Return to work: Employees must return on the agreed date. Failure to return without notice may be treated as job abandonment.
Questions: [contact]
Adjust it to your business, state and benefits plans. See the timekeeping policy creator.
Free Unpaid Time Off Request Form
Unpaid Time Off Request
Employee: __________ | Department: __________ | Date submitted: ______
| Item | Details |
|---|---|
| Dates requested | |
| Total hours or days | |
| Current PTO balance | |
| Reason (optional unless required by policy) | |
| Coverage plan | |
| Return date |
Employee signature: __________ | Manager: ☐ Approved ☐ Denied | Signature: __________ | Date: ______
Should Employees Use PTO First?
Most unpaid time off policies require employees to use available PTO before taking unpaid time. It keeps PTO from piling up while employees take unpaid days, and it keeps paychecks steadier for employees. Some employers allow exceptions, such as letting employees save a few PTO days for emergencies. For FMLA leave, federal rules allow employers or employees to substitute accrued paid leave in certain circumstances; check how your policy and the law work together. See whether employers can require PTO use.
Unpaid Time Off and Exempt Employees
Salary deductions for exempt employees follow special rules. Under federal rules described in the DOL's Fact Sheet #17G, an employer may deduct from an exempt employee's salary for absences of one or more full days for personal reasons other than sickness or disability, for full-day absences due to sickness or disability under a bona fide plan that pays for lost salary, for unpaid FMLA leave and in a few other situations. Deductions for partial days are generally not allowed, and if an exempt employee is ready, willing and able to work, you can't deduct for time when work isn't available.
| Situation (exempt employee) | Deduction generally allowed? |
|---|---|
| Full day off for personal reasons, no PTO left | Yes |
| Half day off for personal reasons | Generally no |
| Full-day sick absence under a bona fide sick pay plan, after leave is used | Yes |
| Unpaid FMLA leave, including partial days | Yes |
| Business closed for the day, employee ready to work | No |
Improper deductions can put exempt status at risk. Check state rules as well. See exempt employee rules.
Unpaid Time Off and Hourly Employees
For non-exempt hourly employees, unpaid time off is simple on the pay side: they're paid for hours worked, and unpaid hours aren't paid. The important part is recording it correctly, so unpaid time isn't mistaken for an unexcused absence and doesn't show up as missed time in attendance tracking. See employee attendance tracking.
Benefits During Unpaid Time Off
- Health insurance: check your plan's rules for continued coverage during unpaid leave; FMLA has its own requirements for group health coverage.
- PTO accrual: many policies pause accrual during unpaid leave, especially if accrual is based on hours worked.
- Holiday pay: decide whether employees on unpaid leave receive holiday pay.
- Retirement contributions: follow your plan document.
- Seniority: state whether extended unpaid leave affects tenure-based benefits.
Write these rules down and apply them the same way to everyone.
How to Approve or Deny Unpaid Time Off Fairly
- Check whether the leave may be protected by law before treating it as discretionary.
- Check coverage and the schedule for the requested dates.
- Apply the same criteria to every request: notice, coverage, length and history.
- Respond promptly so employees can plan.
- Put approvals in writing with dates and return date.
- Explain denials and offer alternatives, such as different dates.
See how to handle overlapping time-off requests.
Voluntary Unpaid Time Off During Slow Periods
Some businesses offer voluntary unpaid time off when work is slow, such as after the holidays. Employees who want extra time off can take it, and the business reduces labor costs without cutting anyone's hours involuntarily. Keep it truly voluntary, offer it fairly, track who takes it and remember the exempt salary rules above. See slow season scheduling.
Tracking Unpaid Time Off
Track unpaid time off as its own leave type, separate from PTO, sick leave and unexcused absences. That keeps PTO balances accurate, keeps attendance records fair and makes payroll straightforward.
| What to track | Why |
|---|---|
| Dates and hours of unpaid leave | Payroll and records |
| Approval and approver | Consistency and documentation |
| Reason category (if shared) | Spot protected leave and patterns |
| Effect on benefits and accruals | Accurate balances and coverage |
| Return date | Planning and follow-up |
Extended Unpaid Leave
Requests for weeks or months of unpaid leave need more structure. Put the agreement in writing: start and end dates, how benefits are handled, whether the job is held, how the employee will stay in touch and what happens if they don't return. For longer leave, check whether FMLA, state family leave or disability accommodation rules apply. See the leave of absence policy template.
Example: A Dental Office
A dental office handled unpaid time off case by case, and a hygienist pointed out that a coworker got a week of unpaid leave while she was told no. The office manager wrote an unpaid time off policy: PTO first, two weeks' notice except in emergencies, a five-day annual limit without owner approval and approval based on coverage. Requests went through the same app as PTO, unpaid time was tracked as its own type and approvals showed who else was off. Complaints stopped, and the team could see the rules were the same for everyone.
Common Mistakes
- Treating protected leave as discretionary unpaid time off.
- Partial-day deductions from exempt salaries.
- Inconsistent approvals for similar requests.
- Counting approved unpaid time as unexcused absences.
- No written return date for extended leave.
- Unclear benefits rules during leave.
Unpaid Time Off Policy Checklist
| Step | Done? |
|---|---|
| Define eligibility and limits | |
| Decide whether PTO must be used first | |
| Set request and notice rules | |
| Set approval criteria | |
| Address protected leave | |
| Address exempt salary deductions | |
| Explain benefits and accrual during leave | |
| Track unpaid time off as its own leave type |
Unpaid Time Off vs. Unexcused Absence
An approved unpaid day off and an unexcused absence both mean the employee isn't paid, but they're very different for attendance and discipline. Unpaid time off is requested and approved in advance or handled under your emergency rules; an unexcused absence is time missed without approval or notice. Record them separately so approved unpaid leave never counts against an employee's attendance record.
| Approved unpaid time off | Unexcused absence | |
|---|---|---|
| Approved in advance? | Yes, or under emergency rules | No |
| Counts against attendance? | No | Per attendance policy |
| Paid? | No | No |
| How tracked | Separate leave type | Attendance record |
Unpaid Time Off for New Employees
New hires are the most common requesters because they haven't accrued PTO yet. Decide in your policy how many unpaid days new employees can take during their first months, and whether pre-planned events like weddings that were scheduled before hire are automatically approved. A small, clear allowance helps new employees feel supported without disrupting coverage. See the new hire orientation checklist.
Questions to Ask Before Approving Extended Unpaid Leave
- Could this leave be protected under FMLA, state family leave or disability laws?
- How will the work be covered?
- Will the job be held, and is that in writing?
- How will benefits be handled?
- What is the return date, and what happens if it changes?
Communicating the Policy
Add the unpaid time off policy to your handbook, explain it at onboarding and remind employees where to request leave. When managers answer requests by pointing to the written policy, employees see that decisions follow the same rules for everyone. Review the policy once a year with your other leave policies, and update it when state or local leave laws change. See the annual policy review.
A short annual reminder to managers about the policy, including the exempt salary rule, keeps approvals consistent as your team grows and new managers join.
Keep copies of approved and denied requests with the reason, so you can show the policy was applied the same way to everyone.
Finally, make sure managers know where to send questions they can't answer, such as requests that might involve medical issues, disability or military service. Routing those to HR or the owner quickly protects both the employee and the business.
Final Thoughts
A clear unpaid time off policy turns awkward one-off decisions into a fair, consistent process. Decide who's eligible, whether PTO comes first, how to request and approve leave and how it affects pay and benefits. Treat legally protected leave separately, follow the full-day rule for exempt salary deductions and track unpaid time as its own leave type so balances, attendance records and payroll stay accurate.
Track Unpaid Time Off With Updoot
Updoot's PTO tracking supports five categories of time off for salaried and hourly employees, so unpaid time off can be tracked separately from vacation and sick leave. Employees request time off in the same app they use for the employee time clock, managers see the PTO calendar and schedule before approving and approved leave flows into the payroll-ready export.
See the Updoot pricing page for current plans, and start a free trial to test it with your team.