Unpaid leave when funding pauses
How a non-profit handles agreed unpaid leave in payroll when one grant ends before the next begins, from the request to the pay run and the paperwork.
By Achekam · · 4 min read · For Non-profit businesses in South Africa, Nigeria, Kenya
The youth employment programme's grant ends in June. The funder has approved a second phase, but the new agreement starts in September. For two months, the programme's three facilitators have no funding behind their salaries, and the organisation's reserves cannot cover them.
Some organisations bridge the gap from reserves or with an inter-fund loan. Some redeploy staff to other programmes. And sometimes, after honest conversations, staff agree to take unpaid leave until the new grant starts, keeping their jobs and their place in the programme rather than being let go.
If that is the route you and your staff agree on, payroll has to reflect it accurately. This article explains how unpaid leave works in Achekam's payroll and the paperwork that protects everyone.
First, agree it; do not impose it
Unpaid leave in a funding gap is a change to someone's pay. In most places, an employer cannot simply impose it, and doing so can expose the organisation to a dispute. Before anything is entered in payroll:
- talk to each affected staff member individually, explaining the funding position honestly;
- consider the alternatives together: reduced hours, redeployment, or using annual leave for part of the gap;
- get legal or HR advice on what your country's law and the staff member's contract allow;
- record what is agreed in writing, signed by both sides.
In Kenya, the Employment Act on Kenya Law sets minimum terms of employment, including contracts, pay statements, leave, termination and the records employers must keep. South African and Nigerian employers should check the equivalent rules with their advisers.
Unpaid leave as its own leave type
Achekam's payroll keeps annual, sick, family responsibility and unpaid leave, with monthly accrual. Unpaid leave is a leave type in its own right, so the days are recorded as what they are, not disguised as annual leave or left out of the records.
That matters later. When the staff member asks how much annual leave they have, the answer has not been reduced by the funding gap. When a funder or auditor reviews payroll for the period, the unpaid days are visible and explained.
Why pay is not cut automatically
Recording unpaid leave does not reduce pay on its own. Payroll is warned and decides.
That can seem like extra work, but it is a sensible safeguard. Unpaid leave in a funding gap is rarely simple: a staff member might agree to unpaid leave for most of the gap but work a few paid days to hand over, or the new grant might start a week early. A person who knows the agreement should decide what the pay run does, rather than a rule deducting days mechanically.
So when the warning appears, the payroll administrator checks it against the signed agreement and then enters the deduction.
Entering the unpaid days on the run
Pay runs can be monthly, fortnightly or weekly, and each period's overtime, commission, allowances, reimbursements and unpaid leave are entered as variable inputs. The unpaid days for the gap go in as a variable input on the run for each affected period.
A pay run is approved by someone other than the person who prepared it, nobody can approve a run that pays themselves, and an approved run is never recalculated. Three consequences for a funding gap:
- Get the inputs in before approval. Once approved, the run will not be recalculated to pick up a missed deduction.
- Correct mistakes on the next run. There is no separate correction run; corrections go in as variable inputs on the regular run. If unpaid days were missed or entered wrongly, adjust them on the following run, and tell the staff member before they see the payslip.
- Use the second person. The approver should compare each staff member's unpaid days with the signed agreement, not just glance at the totals.
For a gap spanning more than one pay period, enter only that period's days on each run. Do not front-load the whole gap into one month.
Staff applying through self-service
A staff member whose login is linked to their payroll record can apply for leave through self-service, as well as download their own payslips and submit expense claims, detail changes or a new bank account for payroll to decide.
For agreed unpaid leave, ask each staff member to apply for the unpaid days themselves once the written agreement is signed. A line manager approves leave for their own team, and nobody approves their own. That keeps the leave record consistent with how all other leave is handled, and it means the request comes from the staff member, which supports the point that the leave was agreed.
Keeping the agreement on file
The signed agreement is the most important document in the whole process. It should state:
- the dates of unpaid leave, and whether any paid days fall within the gap;
- what happens if the new grant starts earlier or later than expected;
- whether benefits continue during the leave, and who pays any contributions that continue;
- the staff member's right to return to their role when funding resumes;
- signatures and dates from both sides.
Keep it with the staff member's records, and keep a note of which pay runs carried the unpaid days.
When the new grant starts
When the second phase begins, stop the unpaid leave from the agreed date and check the first full run carefully. If the new funder pays for the posts, set up the reporting from the start; showing a funder what a funded post really cost explains how. And to see funding gaps before they arrive, compare each grant's timeline with its budget using tracking grant spending against the budget.
List every grant ending in the next year alongside the start date of its successor, and wherever there is a gap, begin the conversation with staff months before it arrives, not weeks.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
