Cash Out Sick Leave in Australia: When It's Allowed

For almost every Australian employee, the answer is no. Paid personal/carer’s leave — the entitlement usually called sick leave — cannot be cashed out unless a modern award or registered agreement contains a specific term permitting it, and only two of Australia’s modern awards do.

Even where cashing out is permitted, it is tightly conditioned. The single most important limit: the employee must still hold at least 15 days of untaken paid personal/carer’s leave after the cash-out.

Key Takeaways

• Section 100 of the Fair Work Act 2009 prohibits cashing out paid personal/carer’s leave except under permitted cashing-out terms.
• Most modern awards do not allow it. The Fair Work Ombudsman notes only 2 awards do.
• Where it is allowed: written agreement each time, a residual balance of at least 15 days, and payment of at least the full amount the leave would have paid.
• Unused personal/carer’s leave is never paid out on termination under the NES — unlike annual leave.

Can You Cash Out Sick Leave in Australia?

Only if a permitted cashing-out term applies to you. The default position under the NES is a flat prohibition.

The logic is deliberate. Annual leave exists to be taken as rest, and the Act allows limited cash-outs because the employee still keeps four weeks in reserve. Personal/carer’s leave exists as insurance against illness and family emergencies. Converting it to cash strips away the protection it was created to provide, so Parliament made the exception narrow.

To work out whether you have the option at all, run through three checks in order:

1. Are you award-covered? Look up your modern award on the Fair Work Ombudsman’s site and search it for a “cashing out” clause under personal/carer’s leave. Most have none.
2. Are you covered by an enterprise agreement? Registered agreements can include a cashing-out term. Read the leave clauses in the agreement itself, not the summary.
3. Award-free and agreement-free? Then there is no permitted cashing-out term and the prohibition applies. A clause in an individual contract cannot create one.

If all three come back negative, the answer is no — and an employer who pays out sick leave anyway has breached the NES, regardless of the employee agreeing to it.

The Four Conditions Where Cashing Out Is Allowed

Where a permitted term exists, sections 100 and 101 of the Fair Work Act impose conditions that must all be met for each individual cash-out.

#	Condition	What it means in practice
1	Separate written agreement each time	No standing authority, no blanket clause in an onboarding pack. One signed agreement per transaction, retained as an employee record.
2	At least 15 days remain untaken	Measured after the cash-out. A balance of 18 days means a maximum of 3 days can be cashed out.
3	Paid at least the full amount	The employee must receive no less than they would have been paid had they actually taken the leave.
4	Genuinely voluntary	It is unlawful for an employer to force, or attempt to force, an employee into or out of a cash-out agreement.

The 15-day floor, worked through

Priya is full-time, has been employed six years, and holds 21 days of accrued personal/carer’s leave. Her enterprise agreement contains a permitted cashing-out term. Her base rate is $42/hour on a 38-hour week (7.6 hours a day).

• Balance: 21 days
• Statutory floor: 15 days
• Maximum she can cash out: 6 days
• Payment: 6 days × 7.6 hours × $42 = $1,915.20 (gross)
• Balance afterwards: 15 days

If Priya’s balance were 14 days, she could cash out nothing — not even one day, because the residual would fall below the floor. The floor is not a proportion; it is an absolute number of days.

Note also that leave loading does not attach here. Leave loading applies to annual leave under most awards, not to personal/carer’s leave.

Sick Leave vs Annual Leave: Why the Rules Differ

Employers frequently apply the annual leave cash-out rules to sick leave. They are not the same.

	Paid personal/carer’s leave	Paid annual leave
Default cash-out position	Prohibited	Prohibited, but widely permitted by award or agreement
Residual balance required	15 days	4 weeks
Award-free employees	Cannot cash out	Can cash out by written agreement
Paid out on termination	No	Yes
Leave loading on the payment	No	Yes, where the award provides loading

That last row matters most. When employment ends, accrued annual leave must be paid out; accrued personal/carer’s leave simply disappears. Our guide to cashing out annual leave in Australia covers the four-week rule and the loading calculation for the other side of this table.

What Employers Get Wrong

Treating an award-free employee as eligible. Award-free employees can cash out annual leave by agreement but have no route to cash out personal/carer’s leave. The two rules are not parallel and copying one across is a breach.

Using a blanket authority. A clause signed at onboarding saying “the employee may elect to cash out sick leave from time to time” does not satisfy condition 1. Each cash-out needs its own written agreement, made at the time.

Paying out sick leave on termination “to be generous”. It is not an entitlement, and paying it can create an expectation that becomes a contractual term for the rest of your workforce. If you want to reward long service, do it through a mechanism you have designed deliberately — see leave payouts on termination in Australia for what actually must be paid.

Pressuring an employee to cash out. Suggesting an employee “clear down” a large balance because it sits on the balance sheet as a liability risks breaching the anti-coercion provision. Personal leave liability is real, but it is not the employee’s problem to solve.

The Alternatives to Cashing Out

If the driver is a large accrued balance rather than the employee’s cash need, there are lawful options:

1. Leave it. Uncapped accrual is normal under the NES. A long-serving employee holding 60 days is not a compliance problem.
2. Provision for it properly. Recognise the liability in your accounts and forecast it, rather than trying to extinguish it.
3. Look at annual leave instead. Excessive annual leave balances can be directed down under most awards, and can be cashed out where a permitted term exists.
4. Offer more generous terms deliberately. An enterprise agreement can add paid wellbeing days that sit above the NES and are designed to be used, not banked.

What This Means for You

• Before you agree to anything, find the clause. No permitted cashing-out term in your award or registered agreement means no lawful cash-out, full stop.
• Check the residual, not the request. The test is what remains after the payment, and it must be 15 days or more.
• Paper each transaction. One written agreement per cash-out, retained with your leave records.
• Never assume the annual leave rules transfer. Different floor, different termination treatment, different loading.

For the underlying entitlement these rules protect, see sick leave vs personal leave in Australia.

Leave Balance tracks accrued personal/carer’s leave in hours with uncapped carryover, so you can see the real balance and liability before anyone starts a cash-out conversation.

This article is general information about Australian workplace entitlements, not legal advice. Check your applicable modern award or enterprise agreement, or contact the Fair Work Ombudsman, for advice about your situation.