Personal Leave Accrual: What Australian Employers Should Know

Managing personal leave is part of running a fair, compliant workplace in Australia. Get it right and you support your team, avoid payroll headaches and reduce the risk of Fair Work disputes. Get it wrong and small errors can snowball into backpay, penalties and unhappy staff.

This guide explains how personal leave (often called sick leave or carer’s leave) accrues under Australian law, the correct way to calculate it after the High Court’s 2020 decision in Mondelez, what to include in your payroll and policies, and common mistakes to avoid.

If you want a simple, accurate framework you can use in your business, you’re in the right place.

What Counts As Personal Leave In Australia?

Personal/carer’s leave is one of the minimum entitlements under the National Employment Standards (NES). It covers two scenarios:

• Sick leave: when an employee can’t work due to their own illness or injury; and
• Carer’s leave: when an employee needs to care for or support an immediate family or household member because of illness, injury or an unexpected emergency.

It’s paid leave for eligible employees and it accrues over time. Unpaid carer’s leave is a separate entitlement and may be available to casuals in certain situations.

If you’re refreshing your general knowledge on entitlements and when leave can be used, it’s helpful to revisit the basics of taking sick leave in Australia.

Who Accrues Personal Leave (And Who Doesn’t)?

Under the NES, personal leave is a paid entitlement for permanent employees and accrues with their ordinary hours.

• Full-time employees: accrue paid personal leave based on ordinary hours (typically a 38-hour week).
• Part-time employees: accrue paid personal leave on a pro-rata basis, aligned to their ordinary hours.
• Casual employees: do not accrue paid personal leave. Casual rates usually include a loading in lieu of such entitlements, but casuals can access unpaid carer’s leave in some circumstances.

If you have employees on varied or flexible rosters, fixed-term arrangements or part-time schedules, the accrual method is the same: it’s calculated by reference to ordinary hours, so everyone is treated fairly regardless of how their week is structured.

Keep in mind personal leave is different from annual leave and long service leave, which have their own rules (including payout on termination for annual leave, and jurisdiction-specific rules for long service leave). If you’re checking entitlements more broadly, it’s worth confirming how annual leave works for part-time employees and using a long service leave calculator where relevant.

How Personal Leave Accrues: The Correct Method After Mondelez

This is the part many employers want absolute clarity on-and for good reason. In 2020, the High Court in Mondelez Australia Pty Ltd v AMWU confirmed the correct approach to personal leave accrual. The key points are below.

The Baseline Entitlement

• 10 days of paid personal/carer’s leave per year for full-time employees under the NES.
• Part-time employees receive the entitlement on a pro-rata basis, according to their ordinary hours.

Importantly, “10 days” is not a fixed number of hours for all employees. After Mondelez, a “day” represents a notional day-i.e. one-tenth of the employee’s ordinary hours in a two-week (or annual) cycle. The practical outcome is that accrual is done in hours so it lines up with the employee’s roster.

The 1/26 Rule (Accrual In Hours)

Personal leave accrues progressively, based on ordinary hours worked. The widely used and legally accepted formula is:

• Personal leave accrues at 1/26 of an employee’s ordinary hours of work.

Why 1/26? For a typical full-time employee working 38 ordinary hours per week, 10 days equates to 76 hours per year (10 × 7.6 hours). Across 52 weeks that is 1/26 of ordinary hours (76 ÷ 1,976). The same logic applies to part-timers based on their ordinary hours.

How To Calculate Accrual In Practice

1. Work out ordinary hours. Confirm the employee’s ordinary hours per week (from the contract or roster).
2. Apply the 1/26 formula. Each pay period, accrue personal leave at 1/26 of ordinary hours worked in that period (or 1/26 of weekly ordinary hours if hours are stable).
3. Record in hours. Maintain the balance in hours, not days. This keeps things fair for different shift lengths and rosters.
4. Deduct hours taken. When personal leave is used, deduct the hours that would have been worked for that shift(s).

Examples

Full-time (38 hours per week)

• Accrual per week: 38 ÷ 26 = 1.462 hours.
• Accrual per year (52 weeks): roughly 76 hours (10 notional days × 7.6 hours).

Part-time (30 hours per week)

• Accrual per week: 30 ÷ 26 = 1.154 hours.
• Accrual per year: roughly 60 hours. If the employee usually works 6-hour shifts, that aligns to 10 notional days.

Variable rosters

• If an employee’s ordinary hours vary, accrue 1/26 of their ordinary hours actually worked each pay period. Keep the balance in hours and deduct the hours of any shift taken as personal leave.

When Does Personal Leave Accrue?

• Starts on day one. Accrual begins from the employee’s first day of employment.
• Accrues during paid time away. Personal leave continues to accrue during paid leave (e.g. annual leave, public holidays) because these count as ordinary time.
• Pauses during unpaid leave. Accrual generally does not occur during periods of unpaid leave (such as unpaid parental leave), then resumes when paid work recommences.

Does Personal Leave Carry Over Or Get Paid Out?

• Carry over: Yes. Unused paid personal leave accumulates from year to year-it does not expire or reset annually.
• Payout on termination: Generally, no. Personal leave is typically not paid out when employment ends, unless an award, enterprise agreement or a specific employment contract says otherwise (this is uncommon).

Awards, Enterprise Agreements And Above-Minimum Terms

The NES sets the minimum. An award, enterprise agreement or contract can provide more generous personal leave terms, but never less. Always check the applicable instrument for:

• Additional personal leave entitlements;
• Notice and evidence requirements; and
• Any different accrual or roster rules for your industry.

Evidence, Notice And Paying Personal Leave

Most disputes about personal leave aren’t about the maths-they’re about notice and evidence. Clear expectations help everyone.

Reasonable Notice

Employees should let you know as soon as practicable that they’re taking personal leave, including the expected duration if possible. Your internal process (who to contact, by when, and how) should be set out in a simple Workplace Policy and reflected in the employee’s contract.

Evidence You Can Require

You can ask for evidence that is “reasonable in the circumstances” before paying personal leave. This often includes:

• Medical certificates for sick leave; and
• Statutory declarations (for example, where a doctor’s certificate isn’t available or to confirm carer’s responsibilities).

What’s reasonable varies with the situation (e.g. length of absence, pattern of absences). It’s sensible to describe your expectations in writing and ensure your approach is consistent. If you’re weighing up when it’s appropriate to ask for proof, these practical rules around medical certificates are a good touchpoint.

Paying Personal Leave

Personal leave is paid at the employee’s base rate for ordinary hours they would have worked during the absence. This generally excludes overtime, penalties and allowances unless an award or enterprise agreement provides otherwise.

If entitlement runs out, employees might move to unpaid leave or other options depending on your policies and their circumstances. Handle these cases with care-our guidance on managing sick leave when entitlements run out can help set expectations.

Common Mistakes Employers Make (And How To Avoid Them)

Even well‑intentioned employers can trip up. Here are the frequent pitfalls and how to sidestep them.

• Accruing in days, not hours. This causes problems for employees with varied shifts. Use hours, always. Accrue at 1/26 of ordinary hours and deduct the hours of the missed shift.
• Misapplying the “10 days” entitlement. After the 2020 Mondelez decision, 10 days is a notional entitlement tied to ordinary hours, not a fixed 10 × 8 hours for every employee. Keep everything in hours.
• Forgetting part-time pro‑rata rules. Use ordinary hours as your base. Don’t just halve a full-time balance without checking the actual rostered hours.
• Incorrect payroll setup. If your payroll system isn’t configured for 1/26 accrual in hours, it can under‑ or over‑accrue. Check the settings against the formula and test with example employees.
• Inconsistent evidence requirements. Apply your policy consistently. If you request certificates for some employees and not others in similar scenarios, it can invite disputes.
• Not recording balances properly. You must keep accurate leave records and show leave balances on payslips as required by workplace laws. Good records are your best friend in an audit or dispute.
• Denying reasonable leave. Employees are entitled to paid personal leave when the criteria are met. If you refuse leave inappropriately, you may breach the Fair Work Act.

A quick way to reduce risk is to bake the essentials into your contracts and policies, and make sure HR and payroll are aligned.

What To Include In Your Contracts, Policies And Payroll

Strong, clear documents make leave easy to manage and defend. Consider the following as a baseline toolkit.

• Employment Contract (FT/PT): Set out leave entitlements, how leave accrues, notice and evidence requirements, and any industry‑specific terms. Align the contract to the NES and any applicable award or enterprise agreement.
• Workplace Policy (Leave & Attendance): Explain who to contact, when to notify, what evidence is expected, and how to request personal leave. Keep it practical and accessible.
• Staff Handbook: Collect your key policies (leave, WHS, conduct, privacy) in one place so employees know the rules and you can drive consistent decisions.
• Payroll configuration notes: Document your 1/26 accrual settings, how balances are displayed on payslips, and the process for adjusting balances if rosters change.
• Record‑keeping process: Confirm how you store leave requests, certificates/stat decs, and approval records securely and in line with privacy obligations.

If you’re updating your documents or want them reviewed against the NES and your award, our team can prepare or refresh your documents and guide your rollout. If you need tailored advice, an employment lawyer can also help you assess edge cases like extended illness, overlapping leave, or return‑to‑work adjustments.

Practical Tips For Smooth Personal Leave Management

• Use plain English with staff. Explain how leave works in simple terms at onboarding and during refreshers-especially the “accrues in hours” concept.
• Map the process end‑to‑end. Make sure managers, payroll and HR all follow the same steps: notification → evidence → approval → payroll deduction.
• Keep an eye on patterns. If absenteeism patterns appear, address them early and fairly, using your policy as the framework.
• Review annually. Each year, check that your contracts, policies and payroll rules still track the law and any updates to awards or enterprise agreements.

Key Takeaways

• Personal/carer’s leave is a core NES entitlement for permanent employees; casuals don’t accrue paid personal leave but may access unpaid carer’s leave.
• After the High Court’s 2020 Mondelez decision, the correct approach is to accrue personal leave in hours at 1/26 of ordinary hours, so it aligns with each employee’s roster.
• Keep balances in hours, not days; deduct the hours of the rostered shift when leave is taken; and continue accrual during paid leave but pause during unpaid leave.
• Unused personal leave carries over year to year and is generally not paid out on termination unless an award, agreement or contract says otherwise.
• Set clear rules for notice and evidence (like medical certificates or stat decs), and apply them consistently to reduce disputes.
• Lock in the rules through an Employment Contract, a practical Workplace Policy and a consolidated Staff Handbook, and make sure payroll is configured to the 1/26 formula.

If you’d like a consultation on managing personal leave accrual or updating your employment contracts and policies, reach our friendly team on 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.