I have an employee who works well and has always been valued by the business. They have recently requested to take 3 months off in order to go travelling and have expressed their interest to return to their job once they return. Would I be able to ask them to leave the company and reapply for their job on their return?  If we come to an agreement in which they are expected to return to their job am I obliged to pay them for their time away?

You have to decide whether or not you want this employee to return and if you want to agree to this request.  The choice is to either agree this which will keep the contract in force or to bring the contract to an end.  This ultimately comes down to whether or not you want to hold this position open for them for 3 months.

If you want the employee to return and you think that you’re able to cope without them for this period of time, possibly by arranging a temporary replacement, then you can agree this between you.  Your employee is entitled to be paid for their time away for any portion of this time that is covered by their annual leave entitlement.  Any additional time off is unpaid leave unless you come to some agreement to pay extra on a discretionary basis.

If you agree a temporary cessation of work then the contract continues as normal and they return to work on the agreed date.  If you are not able to agree this break then you need to tell your employee that and be clear about what you’re saying.  Explain to the employee that you can’t hold their job open so they will have to resign if they no longer wish to be bound by the contract.  Tell them that they can contact you on their return and you will see if you have any suitable vacancies for them but you cannot guarantee that you will be able to rehire them so there should be no expectation of the contract continuing.