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Sick leave is a crucial entitlement designed to help Australian employees take time off work when they’re unwell – without worrying about lost income. But it’s common to wonder what actually happens to your unused sick leave, especially if you’re thinking about resigning, being made redundant, or changing jobs. Does your sick leave get paid out? Does it roll over? Can you cash it out if you don’t need it? What are your rights and obligations when it comes to personal leave in Australia?
Whether you’re an employee planning your next move, or a business owner setting policy for your team, understanding sick leave entitlements is key to legal compliance and a healthy workplace. In this article, we’ll explain what happens to unused sick leave in Australia, what you need to know about payout rules on resignation or termination, and best practices for both employers and employees. If you’re looking for clear, practical advice – keep reading.
What Is Sick Leave (Personal Leave) in Australia?
Sick leave – known under the Fair Work Act as “personal/carer’s leave” – lets employees take paid time off for when they’re unwell, need to care for an immediate family member, or in the case of family emergencies. Personal/carer’s leave is a minimum legal entitlement under Australia’s National Employment Standards (NES), and applies to most private sector employees.
Here’s a quick rundown of how it works:
- Full-time employees: are entitled to 10 days of paid personal/carer’s leave per year.
- Part-time employees: receive a pro-rata entitlement based on hours worked.
- Unused personal/carer’s leave: accumulates from year to year with no cap. So if you don’t use all your sick leave this year, it carries over to next year.
Sick leave is separate from annual leave, long service leave and other types of leave (like unpaid parental leave and compassionate leave). To learn more about your minimum workplace rights, check out our guide to the National Employment Standards.
Does Sick Leave Get Paid Out When You Resign or Leave Your Job?
One of the most common questions we’re asked is: “Do I get paid out unused sick leave when I resign?” The short answer – in most cases, no.
Under Australia’s Fair Work Act and the NES, sick leave (or personal leave) is not cashed out or paid out when an employee resigns or their employment ends (including termination, redundancy, or dismissal), unless an award or enterprise agreement specifically states otherwise (which is rare).
- Do you get paid personal leave when you resign?
No, for most award-covered and non-award employees, accrued sick leave is not paid out upon resignation. - Do you get paid sick leave on termination or redundancy?
No, it is not a legal requirement to pay out unused sick leave if your employment ends by termination (fired), redundancy, or any other form of employment separation. - Does sick leave get paid out on redundancy in Australia?
No, unused sick leave is not part of redundancy or termination pay, unless your specific award or contract states otherwise – which is very uncommon.
Instead, most employees forfeit any accumulated but unused sick leave balance when they leave their job.
For reference, National Employment Standards explain this in greater depth, and employers are expected to comply just as strictly as employees.
Does Sick Leave Carry Over if You Don’t Use It?
Yes! Under the NES, unused sick leave accumulates and carries over from year to year for as long as you stay employed with the same employer. There’s no annual “reset” as with some benefits in other countries.
- If you don’t use all your sick leave in a given year, the balance rolls over to the next year.
- There is no maximum cap – unlike annual leave (which some employers cap at a certain balance), sick leave can keep building up indefinitely while you’re continuously employed.
- Your employer should keep records and display your current sick leave balance on payslips.
But remember: if your employment ends for any reason, this carried-over sick leave is not paid out as cash (unless an award or agreement says so, which is rare). In essence, sick leave is a “use it during employment, or lose it when you leave” benefit.
Are There Any Exceptions? When Can Sick Leave Be Paid Out?
The only exceptions where sick leave might be paid out are:
- Your award (the industrial instrument that covers your role) or enterprise agreement says sick leave is to be paid out on termination (this is very unusual in Australia – always check your specific award or agreement).
- An explicit clause in your employment contract provides for sick leave payout on resignation, redundancy or termination. Again, this is not common practice and should be checked with an employment lawyer if in doubt.
Otherwise, the default position under the National Employment Standards is that sick leave has no cash value after employment ends.
What About Sick Leave Cash Out During Employment?
There is one scenario where sick leave may be “cashed out” prior to termination, but it’s tightly regulated:
- Sick leave cash out is permitted only if your award or enterprise agreement allows it, and specific conditions are met (usually includes a written agreement and retention of a minimum balance in your sick leave “bank” after the cash out).
- Cashing out must be voluntary for both the employer and employee – neither can force the other to agree.
- If you’re not covered by an award or agreement, your contract must explicitly state cash out arrangements to be lawful.
If you’re thinking about cashing out sick leave, get employment law advice first, as Fair Work takes breaches of these rules seriously.
How Much Notice Do You Need to Give for Sick Leave?
When taking sick leave, employees should notify their employer as soon as practicable – which might mean as soon as you realise you’re too unwell to work (even if that’s shortly before your scheduled start time).
You may also need to provide evidence (like a medical certificate) if your employer requests it, especially for absences longer than a day.
- There’s no minimum “notice period” for calling in sick, but timely communication and proper documentation are part of your employment obligations.
- If you are on a notice period for resignation, you can still take sick leave if genuinely unwell – sick leave rights continue during this period.
Abusing sick leave in your notice period (for example, to avoid working out your last days) is likely a breach of contract and can have serious consequences. For more information, see our article on resigning without notice.
Can You Use Up Your Sick Leave Before Quitting?
Some employees consider “using up” their sick leave balance just before resigning so as not to “waste” it. However, sick leave is only for actual illness or carer’s responsibilities. Falsely claiming sick leave, especially during your notice period, is dishonest and can:
- Be grounds for summary dismissal (withholding entitlements like annual leave payout)
- Risk negative references or even legal action for fraud
Ethically and legally, sick leave should only be used for genuine illness or care responsibilities – even during your notice period. Misuse can void your entitlements to accrued benefits.
How Is Unused Sick Leave Treated on Redundancy or Termination?
When you’re made redundant or your employment is otherwise terminated, unused sick leave is not legally required to be paid out. Instead, you are entitled to:
- Outstanding wages up to your last day
- Payout of accrued annual leave (annual leave payout is different to sick leave and must be paid out on termination)
- Long service leave entitlements (if eligible, depending on State law)
- Redundancy pay if applicable under the NES or your award
Unless your award, enterprise agreement or contract says otherwise, sick leave is not part of your payout calculation on redundancy or termination.
Your Options: What Can Be Done About Unused Sick Leave?
If you are concerned about losing a large sick leave balance, it’s worth discussing:
- Transferring to a related company: In some rare cases, where an employee moves within a group, sick leave may be transferred at the employer’s discretion, but this is not a common practice.
- Checking your award/agreement: Some public sector or unique industry awards may have provisions for sick leave payout or transfer, especially for longstanding government employees. Always check the instrument covering your role.
- Raising it in negotiations: If you’re a high-value employee or negotiating a redundancy, you can always request a payout of unused sick leave as part of your separation, but employers are not obligated to agree unless it’s in the award, agreement, or contract.
Best Practices for Employers: Communicating and Complying with Sick Leave Laws
If you run a business, making sick leave rules clear helps prevent confusion (and legal risks) down the track. Here are some tips:
- Have a clear leave policy that explains entitlement, accrual, carry-over, and payout rules. Use plain English and align it with the NES and your award/agreement.
- Communicate clearly that sick leave is not paid out on termination or resignation (unless your award/contract says otherwise).
- List sick leave accrual and balance clearly on payslips. Find out what you must include on payslips here.
- Require evidence of illness when necessary, and train managers to avoid discrimination or adverse action claims about sick leave.
- Use an Employment Agreement that sets out leave entitlements and aligns with legal requirements.
For more details, explore our comprehensive guide to Employment Contracts.
What Legal Documents Will I Need?
Both employers and employees benefit from clear policy and documentation. Here are some key documents to consider:
- Employment Agreement: Outlines leave entitlements, how sick leave is accrued, and payout rules. A solid agreement minimises ambiguity and disputes (learn about drafting one here).
- Workplace Policy/Leave Policy: Details procedures for requesting and approving sick leave, requirements for medical certificates, and how balances will be managed.
- Notice of Resignation/Termination Letter: Should make clear what entitlements (such as annual leave, redundancy pay) will be paid and what happens to sick leave accruals.
- Fair Work Information Statement: Must be provided to all new employees, explaining their basic rights, including personal leave entitlements. Read more here.
Not sure where to start? Speak with a Sprintlaw employment lawyer for tailored advice and policy drafting.
Frequently Asked Questions About Unused Sick Leave in Australia
Do You Get Paid Out Unused Sick Leave When You Resign?
No, in almost all cases in Australia, unused sick leave is not paid out when you resign unless required by your award, enterprise agreement, or specific employment contract.
Does Sick Leave Carry Over from Year to Year?
Yes, total unused sick leave (personal/carer’s leave) rolls over and can be used any time throughout your current employment, with no cap on accumulation.
Is Sick Leave Paid Out On Termination or Redundancy?
No, accrued sick leave is not paid out on termination, redundancy, or dismissal under standard Australian workplace law. The only exception is if your award, agreement, or contract specifically provides for it.
Can You Cash Out Your Sick Leave?
Only if your award or enterprise agreement allows it (and subject to specific rules). Otherwise, it’s not permissible.
What Happens to Unused Sick Leave if You Move to Another Employer?
Your sick leave balance does not move with you; a new job means you begin accruing leave from scratch.
Can You Use Sick Leave During Your Notice Period?
Yes, but only if genuinely ill. Employers can ask for evidence if sick leave is taken during resignation notice.
Key Takeaways: Unused Sick Leave in Australia
- Unused sick leave (personal/carer’s leave) accumulates year-to-year as long as you stay with the same employer.
- Unused sick leave is not paid out when you resign, are terminated, or made redundant, unless your award or agreement specifically says so (rare).
- Sick leave may only be cashed out if your award or agreement allows, and strict conditions are met.
- Sick leave is for genuine illness or caring needs – using it improperly near resignation is risky, potentially unlawful, and may jeopardise your other entitlements.
- Employees and small business owners should have clear policies and employment contracts to avoid confusion or disputes over sick leave rights.
- If you’re unsure about your award, employment agreement, or workplace policies regarding sick leave, seek specialist legal advice tailored to your situation.
If you’d like a consultation on Australian sick leave rules, employment contracts, or workplace policies, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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