Skip to main content
Skip table of contents

Setting up leave without pay (LWOP) - NZ only

You can process leave without pay (LWOP) in MYOB Advanced Payroll, even though it's not currently a completely automated process and annual leave entitlements don't automatically update when an employee takes LWOP.

This page explains what your options are for processing LWOP and what you need to consider.

What is leave without pay (LWOP)?

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.

MBIE strongly recommends to record the LWOP agreement in writing.

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.

Before processing LWOP

Before you can process LWOP in MYOB Advanced Payroll, you need to ensure your annual leave entitlement settings are set up correctly, and that you've created an LWOP entitlement and pay item.

Create an LWOP entitlement

  1. Go to the Entitlements screen (MPPP3300).

  2. On the form toolbar, click the Add New Record icon (:ADV_Plus:).

  3. Complete the Entitlement ID and Description fields.

  4. On the Rules tab, in the Definition section, select the Units option and choose Days from the dropdown.

     Make sure you select Days, as using Weeks with "Other leave" entitlements causes problems with rate calculations, including in termination payments.

  5. In the Properties section:

    1. Select the Leave checkbox.

    2. In the Choose leave type dropdown, choose Other leave.

    3. Select the Non Accruing Entitlement checkbox.

  6. On the Valuation tab, set the Valuation Method to Custom rate, and the Custom rate field to 0.0000.

  7. On the form toolbar, click the Save icon (:ADV_Save: ).

Create an LWOP pay item

  1. Go to the Pay Items screen (MPPP2210).

  2. On the form toolbar, click the New Pay Item icon (:ADV_Plus:).

  3. Complete the Pay Item ID, Description and Payslip label fields.

  4. In the Type field, select ENTITLEMENT PAYMENT.

  5. Optionally, you can choose to select the Allow Leave Reduction checkbox.

  6. In the search field, enter the ID for the LWOP entitlement you created.

  7. On the Additional Info tab, in the Visibility section, select the Show On Payslip, Show Calculated Dollar Value and Show Calculated Units checkboxes.

  8. In the Analysis section, click the General Ledger Purpose field and choose the correct general ledger purpose.

  9. On the form toolbar, click the Save icon (:ADV_Plus:).

Processing LWOP

Adding LWOP to a pay

To process LWOP leave for an employee, you need to add the LWOP pay item to their current pay, then process the pay run as usual. There are a few ways you can add LWOP pay items to a pay:

Manually enter LWOP in a pay run

'Rate' cannot be empty If you get this error message when saving the employee's pay details, follow the instructions further down the page.

  1. Go to the Pay Run Details screen (MPPP3120).

  2. Click the name of the employee who's taking leave. The Employee's Current Pay screen (MPPP3130) opens.

  3. Click the Add Row button (:ADV_Plus:).

  4. In the new row, enter the LWOP pay item.

  5. In the Leave column for the pay item, click Days Taken.

  6. In the Days Taken window, specify the calendar days when the employee took leave.

  7. Click the Save the current record and close the screen button (:ADV_Save:).

  8. On the Employee's Current Pay screen, click the Save button (:ADV_Save:).

Fixing the “'Rate' cannot be empty” error

When adding the LWOP pay item to an employee's pay, you may get a 'Rate' cannot be empty error.

You can resolve this error by changing the pay item rate to 1.0000 before adding it to the employee's pay, then changing it back to zero:

  1. Remove the LWOP pay item from the employee's current pay and close out of it.

  2. Go to Pay Items (MPPP2210) and select the LWOP pay item.

  3. On the Calculation Method tab, set the Use Custom rate value to 1.0000. Save the pay item (you'll change the rate back to zero later in the process).

  4. Open the employee's current pay.

  5. Add the LWOP pay item to their pay details. It will show with a rate of 1.0000. Save the pay.

  6. Go back to the Pay Items screen and select the LWOP pay item.

  7. Set the Use Custom Rate value back to 0.0000, and save the pay item again.

  8. Go back to the employee's current pay and confirm the rate for the LWOP pay item is now 0.0000.

How LWOP impacts annual leave entitlements

When an employee takes more than one week of continuous LWOP, you and employee can agree to one of two options:

  • If LWOP isn't considered a part of continuous employment, postpone the employee's holiday anniversary. You'll need to do this when you add an LWOP pay item into a pay.

When you and your employee can't agree on an option, the MBIE recommends this as the default option.

  • If LWOP is considered a part of continuous employment, reduce the divisor for calculating average weekly earnings (AWE). You'll need to do this after the employee returns from LWOP, when they next take paid annual leave.

In some circumstances, you don't need to do anything special to process LWOP. For example, you can follow your normal pay run process if an employee:

  • takes LWOP that is less than one week, or

  • takes unpaid sick leave, unpaid bereavement or unpaid family violence leave.

For more information, see Leave Without Pay on the MBIE website.

Here are some tips for processing LWOP:

  • Processing LWOP is simpler if you and your employee agree on the LWOP start and finish dates before the employee actually goes on leave.

  • At the end of every pay period when an employee's taken LWOP, make sure that they've been paid the correct salary/wages.

  • Make sure your employee’s work schedule, timesheets and ESS calendars reflecting their LWOP period.

Postponing an employee's annual leave anniversary

You can postpone the employee's annual leave anniversary for entitlement to annual holidays by the amount of unpaid leave taken (excluding the first week). From then on, the employee becomes entitled to their annual holidays later each year.

After you postpone the employee's annual leave anniversary, you also need to manually reduce their annual leave accrual balance. This is because annual leave continues to accrue while your employee is on LWOP.

1. To postpone an employee's anniversary date

If the employee is taking LWOP for more than one week, and you know the start and finish dates, you should update the annual leave anniversary when the LWOP period starts, before completing the current open pay. That way, the employee's payslip will display their new anniversary. However, if you're not certain of the LWOP start and finish dates, you can wait until the LWOP period is completed (i.e. until the continuity is broken, as per the Holidays Act 2003) before updating the annual leave anniversary.

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

  2. In MYOB Advanced Payroll, go to the Pay Details screen (MPPP2310).

  3. In the Employee ID field, select the employee who has taken LWOP.

  4. On the Employment tab, select the Override checkbox for the annual leave entitlement.


  5. In the Trigger Date field for the annual leave entitlement, enter a new annual leave anniversary, as per the Holidays Act 2003 guidance.

  6. In the Reset selected employees to respective Standard Pay window, click Yes.

    After finishing this procedure, you'll need to re-add the LWOP pay item to the employee's current pay.

  7. On the form toolbar, click the Save icon (:ADV_Save:).

2. To reduce an employee's entitlement balance

To avoid human error, it's best to reduce an employee's annual leave accrual balance at the end of each pay period, after they've been on LWOP for more than one week. Otherwise, you can adjust the balance before opening the next pay.

  1. Go to the Entitlement Adjustments screen (MPPP3000).

  2. In the Employee field, select the employee who has taken LWOP.

  3. In the Entitlement field, select the annual leave entitlement.

  4. On the Document Details tab, click Add Row button (:ADV_Plus:).

  5. In the Type field, select Accrual Balance.

  6. In the Quantity field, reduce the balance by an amount equivalent to the LWOP taken in the pay period, excluding the first week of LWOP.


    To reduce the balance, you need to know how much annual leave an employee accrues in one day.
    Annual leave accrued in one day = the amount of annual leave entitled in weeks / (52 * 7).
    You can also check employee's accrual amount per pay period on the Entitlement History Data screen (MPPP6033). 

  7. On the form toolbar, click the Save icon (:ADV_Save:).

After you've adjusted all the pays in the LWOP period, make sure that the total entitlement adjustments you've made in all the pays is equal to the annual leave accrued during that LWOP period. For example, if the total accrual amount is 8.5 during that LWOP period, then the total reduction amount should be -8.5.

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).

You only need to follow these steps if you're going to use the AWE rate (impacted by LWOP) and it's the greater of the leave rates for that employee. The Rate Method column on the Employee Leave Summary screen shows which rate will be used.

To reduce the divisor:

  1. Outside of MYOB Advanced, keep count of how many weeks the employee was on LWOP.

  2. When you pay annual leave, go to the Employee Leave Summary screen (MPPP4045).

  3. Open the AWE Inspection window by clicking the amount in the AWE ($) column.

  4. Manually calculate a new rate with a reduced divisor - You need to reduce the divisor by one for each whole or partial week of LWOP taken, excluding the first week.

  5. Override the system-calculated AWE rate with your manually calculated amount by entering the new rate into the Rate column.

  6. On the form toolbar, click the Save icon (:ADV_Save:).

  7. Continue to process the pay as normal.

After processing LWOP

How LWOP impacts ADP rate calculations

At the end of every pay run, an employee's work schedule updates automatically. If an employee takes leave (including LWOP) within a pay run, MYOB Advanced Payroll currently assumes that the day is an otherwise working day for that employee. So, the days when an employee was on leave (including LWOP) are added to their work schedule as working days. The Working Day checkbox on the Employee Work Schedule screen is used for two things:

  • Indicating if a day is a working day.

  • Calculating the days divisor for the average daily pay (ADP) rate.

Because LWOP is unpaid leave, it shouldn't be used in the ADP rate calculation.

So, if you use the average daily pay (ADP) rate to calculate FBAPS leave, you need to manually update an employee's work schedule when they take LWOP. You must do this after you've completed the pay run.

For more information on ADP rates, see the Holiday Act 2003.

Updating the employee schedule

  1. After completing the pay run, go to the Employee Work Schedule screen (EP00000028).

  2. In the Employee ID field, select the employee that has taken LWOP.

  3. In the Start Date and End Date fields, enter the period when the employee took LWOP.

  4. For the days that the employee took LWOP, deselect the checkbox in the Working Day column.

  5. On the form toolbar, click the Save button (


    If you revert an employee's LWOP, so that a day becomes a paid working day again, you'll need to make sure to re-select the Working Day checkbox for that day.

JavaScript errors detected

Please note, these errors can depend on your browser setup.

If this problem persists, please contact our support.