Unpaid leave: the benefit that holds space for real life

Life doesn’t pause for work. Whether it’s a sick child, an aging parent, or a mental health crisis, nearly every employee will face a moment when personal responsibilities need to come first. An unpaid leave policy gives your team the breathing room to step away, handle life’s curveballs, and return with their job—and dignity—intact. Here’s why unpaid time off could be one of the most compassionate and cost-effective benefits you offer.

What is unpaid leave?

Unpaid leave is exactly what it sounds like—time off without pay. Although it might seem counter-intuitive, this benefit is worth its weight in gold for many employees. Think of it as a safety net that lets them handle life’s curveballs without worrying about losing their job.

Your employee gets to step away for a while, deal with whatever’s going on, and then come back when they’re ready, with the stability and support they need.

FMLA vs. unpaid leave: What’s the difference?

When it comes to taking extended time off, the Family and Medical Leave Act (FMLA) is often the first thing that comes to mind. FMLA is a federal law that guarantees eligible employees up to 12 weeks of unpaid, job-protected leave per year for specific reasons, including serious health conditions, childbirth, caring for a new baby, or tending to an ill spouse, child, or parent. While it provides crucial protection, not all employees are eligible. To qualify, an employee must have worked at a company with 50+ employees for at least a year and logged 1,250 hours in the past 12 months.

An unpaid leave policy, on the other hand, is something you, as the employer, can define and offer more broadly, regardless of FMLA eligibility. It gives you the flexibility to support employees during other challenging times, such as:

• Caring for an aging parent who doesn't meet FMLA criteria
• Taking extended bereavement after the death of a loved one
• Addressing mental health needs not covered under medical leave
• Managing a personal crisis or burnout
• Pursuing caregiving, religious, or volunteer responsibilities

Think of FMLA as the legal baseline and unpaid leave as the human touch that goes beyond compliance. By offering your own unpaid leave policy, you’re creating space for life’s unpredictable moments, not just the ones spelled out by law.

Why is unpaid leave so popular?

Flexible work benefits have become a cornerstone of what today’s workforce expects from employers. 94% of workers believe they would benefit from workplace flexibility, with many citing improved mental health, better work-life balance, and increased productivity as key outcomes. But flexibility doesn’t stop at where or when people work—it also includes the ability to step away entirely when life demands it.

That’s where unpaid leave comes in. As employees face complex challenges like caregiving responsibilities, medical issues, or mental health needs, many find that standard PTO policies simply don’t go far enough. Unpaid leave offers a safety valve—a way to take essential time off without sacrificing job security.

In an era where 40% of workers report burnout, giving employees the space to pause can make all the difference in keeping them healthy, engaged, and committed for the long haul.

How do employees benefit from unpaid leave?

You might be wondering why someone would consider not getting paid to be a benefit. Although it might sound strange at first, employees have many reasons for wanting unpaid leave as a benefit:

• Peace of mind: The ability to take time off to tend to personal matters can reduce everyday stress. Just knowing it’s an option can help employees relax and know they can count on personal time off.
• Work-life balance: These benefits allow employees to prioritize personal needs without sacrificing their careers.
• Job security: Employees can deal with major life events without fear of losing their position.
• Career longevity: 60% of employees have considered leaving a job due to mental health challenges like stress and burnout. Unpaid leave offers a simple, meaningful way to help employees stay.

Why should companies offer unpaid leave?

So, why exactly would a company allow its employees to up and leave for an extended period of time? Well, there are a few reasons why this benefit is a win-win:

• Improved retention: Unpaid leave isn’t a common benefit, so it can be a good strategy to stand out from the competition. About half of all working Americans would consider switching to a different company for better benefits. So, offering unpaid leave could tip the balance in your company’s favor.
• Enhanced recruitment: Unpaid leave isn’t just a recruiting tool—it’s a powerful strategy for keeping the people you already have. 92% of workers consider it important to work for an organization that values their emotional and psychological wellbeing, and offering unpaid leave sends a clear message: you care about your people.
• Increased productivity: Besides helping reduce burnout, supporting employee wellness with workplace benefits has been shown to significantly improve employee engagement and productivity.
• Positive company culture: Offering paid time off shows that you care about your employees as people, not just workers. Plus, a strong workplace culture can predict higher levels of employee engagement and lower levels of stress.

Should my company be offering unpaid leave?

With hundreds of benefits out there, it’s easy to feel pressure to offer everything, but that’s not realistic (or necessary). If you’re considering unpaid leave, here are a few smart ways to figure out whether it’s the right move for your team:

Ask your employees directly.

Use our employee benefits survey template to gauge your team’s interest in unpaid leave and other flexible work benefits. You might be surprised at what they value most.

Benchmark against your competitors.

Use a benefits benchmarking report to see how your offerings compare. If unpaid leave is becoming common in your industry and you’re not offering it, you might be falling behind.

Evaluate current leave usage trends.

Look at how often employees are maxing out PTO, requesting extended time off, or asking for unpaid time informally. These trends can be a clue that your current policies aren’t meeting real needs.

Assess your company culture and values.

If your organization promotes mental health, family-first values, or flexibility, unpaid leave can reinforce that message in a meaningful, low-cost way.

Consider your retention and burnout metrics.

High turnover or frequent burnout could signal that employees need more flexibility than your current benefits allow. Unpaid leave might be a key to keeping your top performers longer.

How to create an unpaid leave policy

Ready to launch your new unpaid leave policy? It doesn’t have to be difficult. Here are four simple steps:

1. Define eligibility: Who can take it and when? Are all employees eligible, or only full-time employees? Are certain positions exempt?
2. Set a maximum duration: Even though this is unpaid time off, you probably don’t want your employees to take multi-year breaks. Set a clear maximum of how many days (consecutive or otherwise) of unpaid leave employees are able to take.
3. Create the request process: How much notice is needed? Who needs to approve the leave request? Is there a form employees need to fill out? Or is a quick email enough?
4. Clarify job protection: Are they promised the exact same role upon return, or just a role in the company?

Creating a holistic employee wellbeing program

While unpaid leave is great, don’t forget that it’s just one piece of the puzzle when it comes to supporting your employees outside of work. That’s where partners like Cleo come in. Cleo offers family care and support benefits that can help with many of the needs that might prompt an employee to take a leave in the first place.

We’ve partnered with Cleo through our Preferred Partnership Program to offer comprehensive family care, from pregnancy support to elder care guidance.