Does Personal Leave Get Paid Out in Australia?

If you’re wrapping up an employment relationship, a common question is whether personal leave gets paid out. From an employer’s perspective, getting this right matters - both for compliance and for maintaining trust with departing staff.

In Australia, personal/carer’s leave (often called “sick leave”) sits under the National Employment Standards (NES). It accrues differently to annual leave and follows its own payout rules at termination. The good news: once you understand the basics, you can build clear processes that reduce disputes and payroll errors.

In this guide, we break down when personal leave is paid out (and when it isn’t), how to manage leave close to termination, and the practical steps to include in your contracts, policies and payroll setup.

What Does The Law Say About Paying Out Personal Leave?

Under the NES, there is no general requirement to pay out unused paid personal/carer’s leave when employment ends. In most cases, unused balances simply lapse on termination.

However, there are two important exceptions:

• Award or enterprise agreement: If an applicable modern award or enterprise agreement says unused personal leave must be paid out, those terms prevail.
• Employment contract: If you’ve promised payout in an Employment Contract, you’ll need to honour it. If you don’t intend to pay out personal leave, your contracts should say so clearly.

This position is different to annual leave, which generally must be paid out at termination (including any leave loading if applicable). If you’re comparing leave types, it’s worth revisiting your obligations around annual leave on resignation to ensure your final pays are calculated correctly.

If you’d like a deeper dive into how personal leave accrues and what happens to it over time, see this overview of unused sick leave in Australia.

What Happens To Personal Leave When An Employee Resigns Or Is Terminated?

In most scenarios, unused paid personal/carer’s leave is not paid out when an employee resigns or is terminated. Here’s how to approach common situations.

Resignation

If an employee resigns with unused personal leave, you do not usually pay it out unless an award, enterprise agreement or contract says otherwise. You will still need to pay out any accrued but unused annual leave, plus other applicable entitlements.

Termination (Including Performance Or Misconduct)

The same principle applies at termination initiated by the employer. Unused paid personal leave is typically not payable, unless you’re contractually or industrially bound to do so.

Redundancy

Redundancy doesn’t change the default rule. Unused personal leave usually lapses, while other entitlements like redundancy pay, notice (or payment in lieu) and annual leave are handled per normal rules. If you’re navigating redundancy, consider how sick leave interacts with severance timelines with this employer guide to redundancy and sick leave.

Casual Employees

Casuals are not entitled to paid personal/carer’s leave under the NES. They may take unpaid carer’s leave when eligible, but there is nothing to pay out at termination.

How To Handle Personal Leave During Notice Periods And Redundancy

Personal leave issues often pop up right at the end. A few scenarios are worth planning for:

Employee Is Sick During Their Notice Period

If an employee gives notice and then is genuinely unfit for work, they can access their paid personal/carer’s leave during the notice period (with reasonable evidence). You pay personal leave at the ordinary rate for the hours they would have worked.

Does this extend the end date? Generally, no - personal leave during notice does not extend the termination date unless you agree to push it back. If the employee runs out of personal leave, they can request annual leave (if available) or take unpaid leave by agreement.

Payment In Lieu Of Notice

If you direct an employee to stop working immediately and provide pay instead of requiring them to work their notice, that payment replaces time worked. In that case, personal leave usually isn’t relevant because there’s no work to be absent from. Make sure you apply the correct rules if you provide payment in lieu of notice, including how you calculate it and what to include on the final pay slip.

Redundancy Timelines

Where a genuine redundancy is underway, an employee can still take paid personal/carer’s leave if they’re unfit for work before their end date. Again, unused balances are typically not paid out once employment ends.

Evidence And Misuse

You can ask for reasonable evidence (such as a medical certificate) when an employee takes personal/carer’s leave, including during a notice period. If you suspect misuse, handle it carefully and in line with your policies and any applicable award. It’s often wise to get advice before taking disciplinary steps.

Superannuation On Termination Components

Personal leave itself is paid at ordinary rates when taken. For termination components such as payments in lieu of notice, check your super obligations carefully, as the rules can be nuanced. This overview on super on termination payments is a helpful starting point.

Payroll Mechanics: Accrual, Balance Checks And Final Pay

Even if personal leave isn’t paid out, you still need to keep clean records and calculate final pay correctly. A few tips:

• Confirm accruals: Paid personal/carer’s leave accrues for permanent employees and carries over year to year. Ensure your system calculates it correctly and separately from annual leave.
• Check balances early: When an employee notifies you of resignation, pull a balance report immediately so there are no surprises if they take leave during notice.
• Follow your instrument: Always cross-check the applicable award, enterprise agreement and contract before finalising the last pay - in case any instrument requires payout of certain entitlements.
• Itemise the final pay: Clearly show annual leave payout, redundancy/notice where applicable, and any adjustments. Make it easy for the employee to see how you arrived at the totals.

If the situation is sensitive (e.g. alleged misconduct, extended sick leave or complex award coverage), seek advice before finalising the termination.

Set Yourself Up For Fewer Disputes: Contracts, Policies And Processes

The best way to avoid end-of-employment disputes is to set clear expectations at the start and keep your processes tight. Consider these four pillars.

1) Nail The Contract

Your employment agreements should spell out leave entitlements in plain English and address whether any unused balances are paid on termination. A well-drafted Employment Contract also clarifies notice, redundancy processes and evidence expectations.

2) Publish A Clear Leave Policy

Policies are where you explain the “how” - who to notify, when evidence is required, how carer’s leave works, how leave interacts with notice and what happens if someone runs out of paid leave. A practical workplace policy reduces ambiguity for managers and staff and keeps decisions consistent.

3) Train Your Managers

Frontline managers often approve leave and field questions during notice periods. Give them simple scripts and checklists for common scenarios (illness during notice, extended absences, potential misuse) so your approach is fair and compliant across the business.

4) Build A Clean Termination Process

Have a checklist for each termination type. That might include issuing a show cause letter (where appropriate), calculating final pay, and collating documents. If you handle terminations often, you may benefit from a structured set of templates, such as an internal suite for warnings, notices and settlement terms.

Common Pitfalls And Employer FAQs

“Is personal leave ever paid out?”

Not by default. It is only paid out if an award, enterprise agreement or contract says so. Otherwise, the balance lapses on termination.

“Do I have to accept personal leave during notice?”

If the employee is genuinely unfit for work and provides reasonable evidence, they can access paid personal/carer’s leave during their notice period. This doesn’t usually extend the end date.

“What if an employee is sick on their last day?”

If they’re unfit and provide reasonable evidence, they can take paid personal leave. You still issue the final pay on the agreed termination date, following the usual rules for payout items like annual leave and notice.

“Should I pay out personal leave as a goodwill gesture?”

It’s your call, but be mindful of setting a precedent. If you want to offer an ex gratia payment, document it as discretionary and non-precedential, and ensure payroll/tax treatment is correct. If you need to finalise things cleanly, you may also consider a settlement deed (seek advice).

“How do medical certificates for casuals work?”

Casuals don’t accrue paid personal leave, but you can still require reasonable evidence for short-notice absences and assess unpaid carer’s leave requests. For clarity around evidence expectations, see this guide to medical certificates for casual employees.

“What about annual leave payout at termination?”

Annual leave is handled differently and generally must be paid out at termination. If you need a refresher, review your obligations around annual leave on resignation.

Key Takeaways

• Unused paid personal/carer’s leave is not usually paid out on termination in Australia, unless an award, enterprise agreement or contract requires it.
• Employees can use paid personal/carer’s leave during a notice period if they’re unfit for work and provide reasonable evidence; this usually doesn’t extend the end date.
• Redundancy doesn’t change the default rule - personal leave typically lapses at the end, while other entitlements (notice or pay in lieu, redundancy pay, annual leave) still apply.
• Keep your contracts and policies clear about leave entitlements and termination processes to reduce disputes and payroll errors.
• Before finalising a last pay, check the applicable award/enterprise agreement and contract, and ensure you handle superannuation and tax correctly for termination components.
• Clean processes - balance checks, evidence requirements, itemised payslips - help you stay compliant and maintain trust when employment ends.

If you’d like a consultation on managing personal/carer’s leave and termination entitlements for your team, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.