Annual sick leave in Australia, employer obligations and compliance

If you run a business with employees in Australia, you must give them paid sick leave. The entitlement is formally called paid personal/carer's leave and it comes from the National Employment Standards (NES) in the Fair Work Act 2009 (Cth), which apply to most private-sector employers. It starts accruing from an employee's first day of work, applies to part-timers as well as full-timers, and is one of the NES obligations that the Fair Work Ombudsman actively checks.

This guide sets out the duties that sit on you as an employer: who accrues the leave and how much, how it must be paid, what notice and evidence you can lawfully ask for, what you cannot do with the entitlement, and the consequences of getting it wrong.

Who has to provide paid sick leave

The NES applies to national system employers, which covers most private-sector businesses in Australia. Within your workforce, the entitlement depends on employment type:

Full-time employees: accrue 10 days of paid personal/carer's leave per year of service.
Part-time employees: accrue a pro-rata amount based on their ordinary hours of work.
Casual employees: no paid sick leave, but 2 days of unpaid carer's leave per occasion and unpaid compassionate leave.
Independent contractors: not employees, so no NES leave entitlements, though misclassifying a genuine employee as a contractor is itself a compliance risk.

The leave is a single pooled entitlement. An employee can draw on it when they are unfit for work because of personal illness or injury, or to care for or support an immediate family or household member who is ill, injured or affected by an unexpected emergency (s 97 of the Fair Work Act 2009 (Cth)). It is separate from annual leave and long service leave.

The accrual duty: banking the entitlement

Under s 96 of the Fair Work Act 2009 (Cth), an employee who is not a casual accrues 10 days of paid personal/carer's leave for each year of service. The leave accrues progressively through the year according to the employee's ordinary hours of work, and the balance accumulates from year to year. There is no cap, so a long-serving employee can hold a substantial balance.

The Fair Work Ombudsman expresses the same rule as 1/26 of an employee's ordinary hours of work each year. For a full-time employee on a standard 38-hour week, that is 76 hours a year, or 10 days at 7.6 hours per day. A part-time employee working 19 hours a week accrues half of that, about 38 hours a year.

Practical points on accrual:

Accrual starts from the first day of work and is based on ordinary hours, not overtime.
Leave keeps accruing while an employee is on paid leave such as annual leave, but not while on unpaid leave.
Payroll software should be set to accrue at 1/26 of ordinary hours per employee, so part-timers do not over-accrue and leave balances stay accurate.

The payment duty: base rate for ordinary hours

When an employee takes paid personal/carer's leave, s 99 of the Fair Work Act 2009 (Cth) requires you to pay the employee at their base rate of pay for their ordinary hours of work in the period. That means no overtime, penalties or loadings unless the applicable award or enterprise agreement says otherwise.

Two situations commonly trip up payroll:

Public holidays: if a public holiday falls inside a period of paid personal/carer's leave, the employee is taken not to be on leave that day (s 98), so the day should not be deducted from their balance.
Compassionate leave: an employee is entitled to 2 days of compassionate leave per occasion when an immediate family or household member has a life-threatening illness or injury, dies, or where there is a stillbirth or miscarriage (s 104). For full-time and part-time employees it is paid at the base rate (s 106); for casuals it is unpaid.

Unpaid carer's leave fills the gap when paid leave is unavailable. Every employee, including casuals, can take 2 days of unpaid carer's leave per occasion to care for an immediate family or household member (s 102). Full-time and part-time employees can only use it once their paid balance is exhausted; casuals, who never accrue paid leave, use it directly. It can be taken as one continuous period of up to 2 days or in separate periods you agree to (s 103).

When an employee's paid balance runs out during a longer illness, your options include allowing them to use accrued annual leave, agreeing to a defined period of unpaid leave, or adjusting hours with a written variation. Each of these should be agreed in writing, and anything your award or enterprise agreement requires should be checked first.

The evidence duty: notice and proof

Under s 107 of the Fair Work Act 2009 (Cth), an employee taking personal/carer's leave, unpaid carer's leave or compassionate leave must give you notice as soon as practicable, which may be after the leave has started, and must tell you the period or expected period of the leave. For a short unexpected absence, a text or email usually satisfies this, as long as it is consistent with your policy.

You can then require evidence that would satisfy a reasonable person that the leave is genuine. A medical certificate is the most common example, and a statutory declaration can be reasonable where a doctor's appointment is not feasible. What is reasonable depends on the circumstances, including how long the absence is, how often the employee is absent and what your policy says.

Points to keep in mind:

Do not demand more than the reasonable person test supports. A certificate for every half-day absence, or a demand for a detailed diagnosis, may be unreasonable and is usually unnecessary.
The same evidence rules apply when you ask a casual employee to support unpaid carer's or compassionate leave.
If an employee provides no notice or evidence when asked, you may be able to refuse payment, but this is a discretionary area. Withhold pay only after getting advice and confirming your policy supports it.
Health information is sensitive. Collect only what you need, keep it confidential and share it on a need-to-know basis.

The fairness duty: no punishment for taking leave

Taking or proposing to take leave is a workplace right under s 341 of the Fair Work Act 2009 (Cth). Section 340 makes it unlawful to take adverse action against an employee because they have, or have not, exercised that right. Adverse action includes dismissing the employee, injuring them in their employment or altering their position to their prejudice. In practice, disciplining or dismissing an employee shortly after they take sick leave is a classic general protections claim, even if you believe you had other reasons.

Unfair dismissal is a related risk. A dismissal for an absence that is protected sick leave is unlikely to be a valid reason, and the Fair Work Commission can order reinstatement or compensation.

Return-to-work clearances deserve care. After a longer absence, surgery or an illness that affects safety, it can be reasonable to ask for a medical clearance or a fit-for-work note. But the request must be limited to what the job actually needs, must not discriminate on grounds such as disability (s 351), and should be set out in your policy in advance.

The same principles apply during a notice period. If an employee gives notice and then becomes unwell, the NES entitlements continue to apply: they can use accrued paid leave and must provide reasonable evidence. The notice period does not switch off their entitlements.

What you cannot do with the entitlement

Cashing out paid personal/carer's leave is prohibited except where a modern award or enterprise agreement allows it, and only then on strict conditions (s 101): the employee's remaining balance must stay at or above 15 days, each cashing out must be by a separate written agreement, and the employee must be paid at least the full amount they would have received for the leave.

Unused personal/carer's leave is generally not paid out when employment ends. The NES requires payment for unused annual leave on termination (s 90), but there is no equivalent for personal/carer's leave, so the default position is that an accrued balance is lost on exit unless an award, enterprise agreement or contract says otherwise.

Consequences of getting it wrong

Contravening an NES provision such as the personal/carer's leave rules breaches s 44 of the Fair Work Act 2009 (Cth), which is a civil remedy provision. The maximum penalty is 60 penalty units per contravention, or 600 penalty units for a serious contravention, and a body corporate faces five times those amounts (ss 539 and 546). Courts can also order back-payment of any leave underpaid.

Beyond penalties, the practical exposure is often bigger. An employee who is disciplined or dismissed around sick leave can pursue general protections or unfair dismissal claims in the Fair Work Commission, and the Fair Work Ombudsman can investigate, issue compliance notices and take enforcement action. Each contravention is counted separately, so a payroll error repeated across a team multiplies quickly.

A compliance checklist

Work through these steps to keep your day-to-day sick leave administration in line with the NES:

Set your payroll to accrue paid personal/carer's leave at 1/26 of ordinary hours for each full-time and part-time employee.
Check your award or enterprise agreement for extra leave, cashing-out terms or different payment rules, and check contracts for anything unusual.
Publish a leave policy covering how employees notify you, what evidence you require and when you require it.
Pay at the base rate for ordinary hours, and do not deduct public holidays that fall inside a period of leave.
Treat casuals' unpaid carer's leave and unpaid compassionate leave as real entitlements, not informal favours.
Keep absence and payroll records, and restrict access to health information.
Train managers not to treat leave-taking as misconduct, and to escalate any return-to-work clearance question.

When to get a lawyer involved

Most day-to-day sick leave administration does not need a lawyer. But there are situations where advice before you act is worth it: withholding pay over disputed evidence, refusing a leave request, requiring a medical clearance, managing a long or recurring absence, and any discipline or termination decision that involves leave. An employment lawyer can check award coverage, review your policy and contracts, and tell you whether the step you are contemplating is defensible. Getting that advice early is usually far cheaper than defending a Fair Work claim later.

The evidence duty is the one most employers get wrong

Many small businesses either never ask for evidence and pay every absence on trust, or ask for more than the law allows and turn a medical absence into a dispute. The statutory test is a simple one: evidence that would satisfy a reasonable person. Write down in your policy what you will ask for, apply it consistently to every employee, and never let a sick leave dispute become a dismissal without speaking to a lawyer first. If you get the evidence step right, most of the other obligations in this guide follow.