No, you are not paid out unused sick leave when you resign in Australia. Unlike annual leave and long service leave, personal (sick) leave is a contingency entitlement — it exists to cover you when you are ill, not as a deferred compensation that accrues a cash value upon termination.
Key Takeaways
- Under the Fair Work Act 2009, only annual leave must be paid out on termination — sick leave has no such requirement.
- Unused personal leave lapses when employment ends, whether you resign, retire, or are dismissed.
- Some enterprise agreements may provide for sick leave payout — but this is rare and must be explicitly stated.
- Notice period pay does not change this — it is separate from your leave balance.
- If you are ill during your notice period, you can use personal leave as normal, but it does not create a payout right.
Why Is Sick Leave Different from Annual Leave?
The distinction comes down to the purpose of each leave type:
Annual leave is a rest and recreation entitlement. It is earned as a form of deferred pay. When employment ends, the Fair Work Act requires employers to pay out any untaken annual leave at the employee’s base rate of pay.
Personal leave (sick leave) is insurance against illness or injury. It is not earned as wages — it is a safety net. The NES provides 10 days of paid personal leave per year, but unused days do not accumulate a cash value. When employment ends, so does the insurance.
This is consistent with how sick leave works in most comparable jurisdictions — the UK, New Zealand, and Canada all treat sick leave the same way.
What Happens to My Sick Leave Balance?
When you resign:
- Your accrued sick leave balance resets to zero
- The hours are gone — you cannot convert them to cash or transfer them to a new employer
- Your annual leave will be paid out (including any leave that accrued during your notice period)
- Your long service leave may be paid out depending on how long you have served
Some employers voluntarily offer a sick leave payout as a goodwill gesture, particularly for long-serving employees — but there is no legal obligation to do so.
Are There Any Exceptions?
There are limited situations where sick leave may be paid out:
- Enterprise agreement provision — if your agreement explicitly provides for sick leave payout on termination, the employer must honour it. This is uncommon.
- State government employment — some state public sector awards provide for partial payout of unused sick leave (e.g., upon retirement after 10+ years of service)
- Employment contract clause — your individual contract may include a payout provision, though this is rare for sick leave
- Industrial instrument — some legacy awards and agreements predating the Fair Work Act still contain payout provisions
In the vast majority of private sector roles, there is no entitlement to sick leave payout.
What About Long Service Leave?
Long service leave is different. If you have served the qualifying period (typically 7 years in most states, 10 years in some), you are generally entitled to be paid out for pro-rata long service leave upon resignation — subject to state legislation.
The payout rules vary by state, so check the relevant legislation for your jurisdiction.
FAQ
Can I use my sick leave before I resign?
If you are genuinely ill, you can take personal leave during your notice period. Taking leave you are not entitled to — or claiming sick leave when you are well, specifically to use up your balance before resigning — would be misconduct and could affect your reference or final pay.
Does unpaid sick leave get paid out?
No. If you have exhausted your 10 days of paid personal leave per year, any further absence is unpaid. There is nothing to pay out on termination.
What about personal leave for carer’s purposes?
The same rules apply. Unused carer’s leave does not pay out on termination. It is a contingency entitlement, not a cashable balance.
Can my employer choose to pay out my sick leave?
Yes, an employer can voluntarily pay out sick leave as a gesture of goodwill or under a company policy. Such payments are entirely discretionary and are treated as ordinary earnings for tax purposes. Payment does not create a precedent or obligation for future employees.
If I move to a different role within the same company, does my sick leave transfer?
If you remain employed by the same legal entity, your sick leave balance carries over to the new role. The balance does not reset. If the new role is with a different legal entity (even within the same corporate group), the sick leave generally does not transfer.