Consequences of Leave Without Pay and Nonpay Status

LWOP…you might call it a self-directed furlough.

Out of Office

LWOP (leave without pay or “nonpay status”) is a temporary unpaid status and approved absence from duty, generally at the request of the employee. Some people may wonder why anyone would be interested in taking LWOP, but if you’re a clerk you probably have experienced a variety of reasons people choose to utilize this option. And you probably can understand that having software that helps you manage LWOP is really helpful. If you have Black Mountain Payroll software, you can create an LWOP “time type” to account for Leave With Out Pay hours.  This enables you to “show” the hours to employees on their timecard/check stub and allows the payroll clerk to run reports on LWOP time for reporting to management. Slick!

Granting an employee LWOP depends on the reason for the leave, local laws and regulations, the employee, their position and supervisor approval, but some common reasons that employees may request LWOP status include:

  • Family crisis
  • Illness
  • Military Duty
  • Maternity Leave
  • Sabbatical

It may sound pretty simple, but LWOP gets complicated when it comes to what entitlements the employee is guaranteed while on LWOP.  For example, employees need to consider implications of LWOP on their vacation days, sick leave, retirement, medical insurance, and other entitlements.

If you are considering taking LWOP, you will want to review the LWOP policy for your office, and carefully consider the implications of taking LWOP.  While LWOP entitlements vary greatly, many base their policy on the Federal Pay and Leave Administration’s policy for Leave Without Pay.  This policy outlines the following circumstances as acceptable reasons to grant LWOP:

  • FMLA (Family and Medical Leave Act): Provides employees with up to 12 weeks of unpaid leave during any 12-month period for certain family and medical leaves such as the birth of a new child, a sick family member, or adoption.
  • Uniformed Services Employment and Reemployment Rights Act: Provides employees with up aid leave when employment is interrupted by a period of service in the uniformed services.
  • Executive Order 5396: Provides unpaid leave for disabled veterans for medical treatment.

When on LWOP, the Federal Pay and Leave Administration currently has the following policy on nonpay status entitlements.  These guidelines are set for federal employees, but similar guidelines may be used by your organization. It is important to specifically review the LWOP policy for YOUR organization carefully before starting your unpaid leave.

Credible service: The first 30 calendar days of each LWOP period are considered credible service, with the exception of employees still in their probationary period. All nonpay status is credible service as it pertains to time-in-grade.

Leave: Nonpay status affects the accrual of annual leave and sick leave. Employees are not granted leave accrual for the 80-hour work period that LWOP is taken, once an 80-hour accumulation of LWOP has occurred.

Recruitment, relocation, and retention incentives: Credible time during nonpay status is determined by original service agreement.

Reduction in force: An aggregate of up to 6 months of nonpay status in a calendar year is counted as credible service.

Severance pay: Nonpay status time is fully credible for the 12-month continuous employment period to qualify for severance pay; up to 6 months of nonpay per calendar year.

Retirement benefits: Periods of nonpay status of 6 months or less in a calendar year are reflected in employee’s average salary calculation.

Health benefits: Enrollment continues as long as nonpay period does not last more than 365 days.  Employee is still responsible for picking up their portion of the benefits out of pocket.

Life insurance: Coverage continues for 12 consecutive months of nonpay status at no cost to the employee.

Flexible Spending Account (FSA): Incurred eligible healthcare expenses will not be reimbursed until employee retunes to a pay status and allotments are successfully restarted. Dependent care expenses incurred will be reimbursed up to the balance on the dependent care account.

Federal Long Term Care Insurance: Coverage continues as long as premiums are paid.

If you are considering moving to a nonpay, or leave without pay status, there are some important considerations you need to be aware of.  Moving to a LWOP status can terminate some of your eligibility for benefits and credible time.

Share This Post:

This entry was posted in Best Practices, City Clerk Cafe, Uncategorized and tagged , , , , , . Bookmark the permalink. Follow any comments here with the RSS feed for this post. Both comments and trackbacks are currently closed.