What To Do When Sick Leave Entitlements Run Out In Australia

If you run out of paid sick leave in Australia, your employer usually doesn't have to keep paying sick leave once your accrued personal/carer's leave balance is exhausted. Your next steps are usually annual leave, agreed Leave Without Pay, reasonable adjustments, workers' compensation if the condition is work-related, or a careful fitness-for-work process.

If you're an employer, the key is to move slowly and fairly. You should check your employee's entitlements, ask for reasonable medical evidence, consider safe adjustments, protect private health information and avoid rushing into dismissal. If you're an employee, the key is to communicate early, provide evidence when asked and discuss a practical recovery or return-to-work plan.

What Happens When Paid Sick Leave Runs Out?

Under the National Employment Standards, full-time and part-time employees accrue 10 days of paid personal/carer's leave each year. It accrues progressively based on ordinary hours of work and unused leave carries over from year to year. You might call this sick leave, but legally it also covers carer's leave for an immediate family or household member.

If you're a casual employee, you don't receive paid personal/carer's leave under the National Employment Standards. However, you can still have important protections, including unpaid carer's leave in certain situations and protection from unlawful adverse action or discrimination.

Once paid sick leave is used up, there's usually no automatic right to more paid sick leave unless an award, enterprise agreement, employment contract or workplace policy gives something more generous. That doesn't mean the employment relationship ends. It means you and the employee need to work out what happens next.

The most common options are:

• the employee requests accrued annual leave, if they want to keep being paid;
• you and the employee agree to Leave Without Pay;
• the employee returns on modified duties, reduced hours or another reasonable adjustment;
• a workers' compensation process starts if the illness or injury is work-related;
• you seek further medical information to assess fitness for work and safety.

If you need a deeper look at the overall process, you can read more about what to do when sick leave runs out and how employers can respond.

Can You Use Annual Leave When Sick Leave Is Exhausted?

Yes, you can usually ask to use annual leave after paid sick leave is exhausted. Annual leave isn't the same entitlement as sick leave, so it's generally handled as an annual leave request rather than an automatic sick leave payment.

Under the National Employment Standards, full-time and part-time employees accrue paid annual leave, and an employer must not unreasonably refuse a request to take it. Modern awards, enterprise agreements and employment contracts can add extra rules about notice, taking leave in advance, directions to take annual leave or minimum leave periods.

For example, if Priya has used all her paid sick leave but has 38 hours of annual leave accrued, she may ask to use one week of annual leave while recovering from surgery. If the request is reasonable and there's no strong operational reason to refuse it, approving the annual leave may be the simplest option for everyone.

It's also worth knowing the reverse situation. If you become sick while already on annual leave and still have paid personal/carer's leave available, you may be able to swap that period to personal/carer's leave if you provide evidence. But if your paid personal/carer's leave balance is zero, there's no paid sick leave balance to swap into.

If you manage payroll, make sure your records clearly show which leave type is being used. Annual leave, paid personal/carer's leave and unpaid leave affect balances differently, so it's important not to process them as the same thing.

Can You Take Unpaid Sick Leave Or Leave Without Pay?

People often search for unpaid sick leave, but under the National Employment Standards there isn't a broad automatic entitlement to unlimited unpaid sick leave for an employee's own illness. In practice, extended unpaid time off for your own illness is usually dealt with as Leave Without Pay, or LWOP, by agreement between you and your employer.

Many businesses allow LWOP once paid sick leave has run out, especially where the employee has clear medical evidence and a likely return date. This can be a sensible way to support recovery without ending the employment relationship. However, you should record the terms clearly so both sides know what has been agreed.

A good LWOP arrangement usually covers:

• the start date and expected end date of the unpaid leave;
• whether the employee needs to provide updated medical certificates;
• how often you and the employee will check in;
• whether any work can be done safely during recovery;
• what happens if the employee can't return by the review date.

If you're an employer, you should apply LWOP consistently and check any award, enterprise agreement, contract or policy before approving or refusing it. You can learn more about common rules and practical considerations for Australian employers in our overview of Leave Without Pay.

Unpaid carer's leave is different. Employees, including casuals, are entitled to 2 days of unpaid carer's leave for each permissible occasion when they need to care for or support an immediate family or household member because of illness, injury or an unexpected emergency. This doesn't usually cover your own illness.

What Medical Evidence Can An Employer Ask For?

If you're an employer, you can ask for reasonable evidence to support personal/carer's leave and related absences. This might be a medical certificate, a statutory declaration or another document that would satisfy a reasonable person that the leave is being taken for a permitted reason.

When paid sick leave has run out and the absence is continuing, you may need more than a one-line certificate. It's often reasonable to ask for information about:

• how long the employee is likely to be absent;
• whether the employee can perform some duties safely;
• any temporary restrictions, such as lifting limits or reduced hours;
• whether remote work, modified duties or a staged return may help;
• when the situation should be reviewed.

You should focus on functional capacity, not unnecessary medical detail. In many cases, you don't need a diagnosis. You need to know what the employee can and can't safely do, and for how long.

If an employee is returning after a significant absence or the role involves safety-sensitive duties, a targeted fitness-for-work note can be appropriate. You can read more about when it may be reasonable to request a medical clearance before an employee returns to work.

In limited cases, an independent medical examination may be reasonable, particularly where the evidence is unclear, there are safety concerns or you need reliable information to assess the inherent requirements of the role. If you request an independent assessment, be clear about the questions for the doctor, keep the request proportionate and generally expect the employer to pay for it.

Health information is sensitive. Private sector employers may have an employee records exemption under the Privacy Act in some circumstances, but that exemption doesn't cover everything, and state or territory health records laws may also apply. As a practical rule, collect only what you need, store it securely and limit access to the people managing the absence. A clear Privacy Policy and internal process help build trust and reduce risk.

Can You Be Dismissed If You Run Out Of Sick Leave?

Running out of paid sick leave does not, by itself, give an employer a green light to dismiss you. Australian employees have important protections when they're temporarily absent because of illness or injury.

Under the Fair Work framework, an employer must not dismiss an employee because of a temporary absence due to illness or injury in protected circumstances. As a broad rule, an absence is generally protected if it's supported by required evidence and isn't more than 3 months, or not more than a total of 3 months over a 12-month period, unless the employee is on paid personal/carer's leave for the duration of the absence. Awards, enterprise agreements, workers' compensation laws and anti-discrimination laws can also affect the position.

Even after those time thresholds are reached, dismissal isn't automatic. If you're an employer, you still need to consider unfair dismissal risks, general protections, discrimination laws, work health and safety duties, workers' compensation obligations and whether the employee can perform the inherent requirements of the role with reasonable adjustments.

Reasonable adjustments might include temporary reduced hours, altered start times, lighter duties, changes to workload, assistive equipment or remote work, depending on the role and the medical evidence. The adjustment doesn't need to remove the inherent requirements of the job or create unjustifiable hardship, but you must genuinely consider it.

If you're considering a capability decision, your process should be careful and evidence-based. You should gather current medical information, consult with the employee, consider adjustments and redeployment where feasible, and give the employee a real chance to respond before any final decision. You can read more about the key steps and risks in our overview of termination on medical grounds.

Mental health conditions should be treated with the same care as physical conditions. You need to maintain a safe workplace and avoid adverse action or discrimination connected to a protected attribute. Training your managers, keeping conversations respectful and documenting adjustments can make a real difference. You can read more in this guide to mental health obligations.

Worked Example: Sam Runs Out Of Sick Leave

Sam works full-time for a small marketing agency on 38 ordinary hours per week. Sam has accrued 24 hours of paid personal/carer's leave and 62 hours of annual leave. After an unexpected illness, Sam is medically unfit for work for 3 weeks, or 114 ordinary hours.

Here is how the leave might be managed:

• First, Sam uses the 24 hours of accrued paid personal/carer's leave. Those hours are paid as sick leave.
• That leaves 90 hours of the 3-week absence still to cover.
• Sam asks to use 38 hours of annual leave for week 2. The employer checks the award and policy, then approves it because the request is reasonable.
• That leaves 52 hours unpaid, unless another paid entitlement applies.
• The employer and Sam agree to 1 week and 14 hours of Leave Without Pay, with a check-in before the next roster is finalised.

Sam's doctor then says Sam can return on 4-hour days for 2 weeks and should avoid client travel. The employer looks at Sam's duties and agrees to a temporary staged return: 20 hours per week, remote work where possible and no travel until the next medical review.

The outcome is practical because each step is separated clearly. Sick leave is paid only up to Sam's accrued balance. Annual leave is used by request and approval. The remaining absence is unpaid by agreement. The return-to-work plan is based on medical evidence and the role's requirements.

If Sam's recovery became uncertain or extended for months, the employer would need updated medical evidence and a more formal capability process before making any decision about Sam's ongoing employment.

Step-By-Step Checklist For Employers

When an employee has no sick days left, a simple process helps you stay fair, consistent and compliant.

1. Check The Leave Balance: Confirm the employee's paid personal/carer's leave, annual leave and any other relevant entitlements in payroll.
2. Check The Rules: Review the Employment Contract, award, enterprise agreement and workplace policies before responding.
3. Ask For Reasonable Evidence: Request evidence that confirms the absence and, for longer absences, the likely timeframe and functional restrictions.
4. Discuss Options Early: Talk about annual leave, LWOP, flexible work, modified duties, workers' compensation or a staged return.
5. Record The Arrangement: Confirm dates, pay status, evidence requirements, check-ins and review points in writing.
6. Protect Health Information: Keep medical documents secure and share them only with people who genuinely need access.
7. Review Before Deciding: If the absence continues, get updated evidence and reassess reasonable adjustments before considering capability action.

If you want a quick sense check of your current employment documents and compliance gaps, the Legal Health Check can help you identify what needs attention.

Key Documents To Put In Place

The hardest sick leave situations are much easier to manage when the rules are already clear. The right documents give your employees confidence and help your managers make consistent decisions.

• Employment Contract: Sets out leave entitlements, notice expectations, medical evidence requirements and fitness-for-work obligations. A tailored Employment Contract reduces confusion later.
• Staff Handbook: Explains your processes for personal/carer's leave, annual leave, LWOP, medical certificates, return-to-work steps and privacy. A practical Staff Handbook helps managers apply the same approach across the team.
• Leave Without Pay Letter: Confirms the unpaid leave period, review dates, medical evidence requirements and what happens if the employee isn't ready to return.
• Fitness-For-Work Request: Gives the treating practitioner clear questions about duties, restrictions, hours and safe return options.
• Return-To-Work Plan: Records temporary adjustments, hours, duties, review dates and each person's responsibilities.
• Privacy Policy And Internal Procedure: Explains how health information is collected, stored and accessed. A compliant Privacy Policy should be supported by sensible internal handling practices.
• Separation Documents: If employment ends after a fair process or by agreement, the outcome may need clear written terms, such as an Employee Separation Agreement.

If you're confirming LWOP or a staged return in writing, a simple outline usually includes:

1. Employee And Role Details: Identify the employee, position, manager and workplace.
2. Background: Briefly record that paid personal/carer's leave has been exhausted and medical evidence has been provided.
3. Leave Or Return Arrangement: Set out whether the period is annual leave, LWOP, modified duties or reduced hours.
4. Pay And Entitlements: State which periods are paid and unpaid, and how leave balances will be treated.
5. Medical Evidence And Reviews: List any update requirements and scheduled check-in dates.
6. Confidentiality And Privacy: Confirm that medical information will be handled sensitively and securely.
7. Next Steps: Explain what happens if the employee is fit to return, needs more time or has changed restrictions.

You should tailor these documents to your workplace, award coverage, role requirements and the employee's circumstances.

Key Takeaways

• When paid sick leave runs out, you're usually not entitled to more paid sick leave unless a contract, award, enterprise agreement or policy says so.
• Common next steps include annual leave by request, agreed Leave Without Pay, reasonable adjustments, a staged return or workers' compensation if the condition is work-related.
• Unpaid sick leave for your own illness is usually handled as LWOP by agreement, while unpaid carer's leave is a separate National Employment Standards entitlement.
• You can ask for reasonable medical evidence, especially for extended absences, but you should focus on functional capacity and protect health information.
• Running out of sick leave doesn't automatically justify dismissal. Temporary absence protections, unfair dismissal, discrimination and work health and safety obligations may still apply.
• Clear contracts, staff policies, LWOP letters and return-to-work plans make extended illness easier to manage fairly and consistently.

If you'd like help with sick leave policies, Leave Without Pay arrangements, fitness-for-work processes or employment contracts, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.