If you’re managing staff in Australia, questions about notice periods and leave come up sooner or later. Can an employee use annual leave after they resign? What if they call in sick during their notice? And how do you balance business needs with your obligations under workplace laws?
Handled well, the notice period can be smooth and compliant for everyone. With the right processes and clarity on how leave works at the end of employment, you’ll reduce disputes, protect productivity and stay on the right side of your legal obligations.
In this guide, we’ll step through the key principles employers should know about leave during a notice period, how to manage common scenarios, and the documents and processes that help you stay compliant.
What Is a Notice Period And Why Does It Matter?
A notice period is the minimum time an employee or employer must give before ending employment. During this period, the employment relationship continues, so most usual rights and obligations remain in place (including leave rules and workplace policies).
The length of notice can be set by the National Employment Standards (NES), an applicable modern award or enterprise agreement, and the employment contract. If there’s a conflict, the most beneficial entitlement for the employee usually applies (provided it meets the NES minimums).
If you’re unsure how much notice applies in your situation, it’s worth checking the rules that govern your workplace and your contracts. A quick review of how notice is calculated can help you avoid underpayment or timing issues during separation. For a deeper dive into how the rules work, see calculating notice in our guide to employee notice periods.
Can Employees Take Leave During a Notice Period?
In most cases, yes. Because employment continues through the notice period, employees can access their usual leave entitlements in line with your policies, their contract and any applicable award or enterprise agreement.
Annual Leave
Employees can request to use accrued annual leave during the notice period. As the employer, you generally decide whether to approve annual leave requests, taking into account operational needs and any rules in the relevant award or agreement.
It’s reasonable to refuse a request if granting the leave would genuinely disrupt the business (for example, critical coverage requirements). However, it’s important to be consistent with similar requests and follow any decision-making criteria in your policies or industrial instrument. Some employees will instead prefer a payout of unused annual leave on termination, which you must make in their final pay. More on this below and in our guide to annual leave on resignation.
Personal/Carer’s (Sick) Leave
Paid personal/carer’s leave can be used during the notice period if the employee is genuinely unwell or needs to care for an immediate family or household member. You can ask for evidence in line with your usual practice or any award/enterprise agreement rules, such as a doctor’s certificate or statutory declaration. If the evidence requirements are met, this leave must be processed as normal paid leave. For practical guidance on handling these requests, see our overview of sick leave during notice periods.
Public Holidays
If a public holiday falls during the notice period, the employee will generally be entitled to be paid for that public holiday if it would have been an ordinary day of work, even if they’re not rostered due to notice. This sits alongside your usual payroll requirements and any relevant award terms.
Unpaid Leave
Unpaid leave can occur if an employee has no accrued entitlement left or requests time off without pay. Whether unpaid leave impacts the running of the notice period depends on the award, agreement, contract and (most importantly) what you and the employee agree in writing. There isn’t a blanket rule that unpaid leave “pauses” notice. If you intend unpaid leave not to count towards notice, make that clear in writing up front and ensure it’s permitted under your industrial instrument. For broader rules around unpaid time off, see our quick guide to leave without pay.
Employer-Directed Leave
Directing an employee to take annual leave during their notice period may be possible if it’s reasonable and allowed by the contract, award or enterprise agreement (for example, to reduce an excessive leave balance). Apply this carefully and consistently, and always check the specific rules that apply to your workplace before issuing a direction.
Key Legal Principles Employers Should Keep In Mind
To manage leave during notice in a compliant and practical way, keep these core principles front of mind.
Employment Continues Until the End Date
Unless you make a lawful payment in lieu of notice, the employment relationship remains active until the final day of the notice period. Employees remain entitled to applicable benefits and protections, and you can continue to set reasonable directions about work and conduct during this time.
Paid Leave Usually Does Not Extend Notice
As a general rule, taking paid annual leave or paid personal/carer’s leave during the notice period doesn’t extend the end date. The “clock” usually keeps running. The exception is if an industrial instrument or contract states otherwise. Unpaid leave is different and should be handled by agreement, as noted above.
Payment in Lieu of Notice
You may choose to end employment immediately and pay out the notice period. This approach can be useful where it’s not practical or safe for the employee to work out their notice. If you choose this path, confirm the terms in writing and ensure the payment covers all relevant components. For further detail, review payment in lieu of notice.
Evidence Requirements for Personal/Carer’s Leave
You can require reasonable evidence for personal/carer’s leave at any time, including during notice. Make sure your policy sets out what you accept as evidence and when it must be provided, and apply it consistently. If your policy or award sets stricter standards, follow those standards. If you need a refresher on when you can ask for documentation, see when employers can request medical certificates.
Accruals and Payouts
Except for casuals, leave typically continues to accrue while the employee is employed, including during a notice period and while on paid leave. Accrual may not occur during some forms of unpaid leave, depending on the circumstances and applicable instrument.
On termination, you must pay out accrued but untaken annual leave. Personal/carer’s leave is not paid out on termination. If long service leave is applicable under state or territory law, ensure it’s properly calculated and included. Because final pay can be complex, especially where different types of leave and public holidays apply, it’s sensible to double-check your figures against your award/EA and your contract or run through a structured checklist such as our guide to calculating final pay.
Superannuation Considerations
Superannuation is generally not payable on unused annual leave paid out on termination, but may be payable on ordinary hours worked or certain leave taken during employment. Always check the Superannuation Guarantee rules and your payroll settings to ensure correct treatment and read our overview of whether you pay super on termination payments.
How To Manage Leave Requests During Notice: A Practical Process
Every workplace is different, but a simple, consistent process reduces risk and helps you make fair decisions quickly.
1) Check the Rules That Apply to the Employee
- Review the employment contract for notice and leave clauses.
- Confirm if a modern award or enterprise agreement applies and whether it sets specific rules on leave during notice.
- Refer to your workplace policies (e.g. leave, evidence requirements, approving/declining leave) and ensure they are up-to-date and consistent with the law.
2) Assess the Request on Its Merits
For annual leave, consider operational needs, coverage, timing and fairness. For personal/carer’s leave, process it as paid leave if sufficient evidence is provided. If you need to decline annual leave due to business needs, keep a short note of your reasons and apply the same approach to similar requests to avoid inconsistency.
3) Confirm Whether Unpaid Time Off Affects the End Date
If the employee requests unpaid leave during notice, decide whether the notice period will continue to run or be suspended. There is no general rule that unpaid leave pauses notice; it’s a matter for the contract, applicable industrial instrument and agreement between the parties. Confirm your position in writing before the leave starts.
4) Communicate in Writing
Respond to leave requests and decisions in writing, including any conditions (for example, evidence requirements for personal leave or confirmation of whether unpaid leave affects the end date). Clear communication helps avoid misunderstandings.
5) Prepare Accurate Termination Pay
Before the end date, prepare the final pay calculation with line-by-line transparency. Include any annual leave taken during notice, accrued but unused annual leave, applicable public holidays, and other entitlements that apply (for example, redundancy pay where relevant, or long service leave). If you’re making a payment in lieu of notice, ensure that’s clearly itemised. For a structured approach, see our guide on final pay calculations.
Common Scenarios And How To Handle Them
An Employee Is Sick During Their Notice Period
If they provide satisfactory evidence consistent with your policy or award, process the absence as paid personal/carer’s leave (if they have an accrual). Paid leave usually does not extend the notice period. If their accrued personal leave runs out, you can discuss other options such as annual leave or unpaid leave.
An Employee Wants To Take All Their Annual Leave During Notice
You can consider the request but you’re not obliged to approve it if it would cause genuine operational issues. Offer reasonable alternatives where possible - for example, approving part of the leave or agreeing to a payout of unused leave at the end. Document your decision and the reasons.
Unpaid Leave During Notice
Confirm in writing whether the notice period will continue to run during unpaid leave. Because there isn’t a universal rule that unpaid leave pauses notice, aligning expectations up front will prevent disputes later. If uncertain, agree a position with the employee (consistent with any award/EA obligations) before the leave is taken.
Giving Notice While Already on Leave
Employees can give notice while on annual leave or personal/carer’s leave. In most cases, paid leave during this period counts towards the notice period. Ensure your records capture the notice date, end date and any leave taken, and proceed with final pay preparation accordingly.
Employer Chooses Payment in Lieu of Notice
If it’s not practical for the employee to work out their notice, you can end employment immediately and pay the amount they would have earned during the notice period. Confirm the arrangement in writing, include all required components, and ensure you meet your other obligations (such as leave payouts). See our overview of payment in lieu of notice for key compliance points.
Documents And Policies That Make Notice Periods Easier
Clear, tailored documents give everyone certainty and reduce the chance of disputes during notice. Consider the following:
- Employment Contract: Set out the notice periods, how leave works during employment, and any rules around directing annual leave. If you need a template tailored to your business and industry, see our Employment Contract service.
- Leave Policy: Explain how to request annual and personal/carer’s leave, evidence requirements, and how requests are assessed during notice.
- Staff Handbook: Bring together key policies (leave, code of conduct, performance, grievance) so expectations are clear from day one. Our Staff Handbook Package can be tailored to your workplace.
- Termination and Exit Checklist: A short checklist covering final pay components, return of property, system access removal, and any confidentiality and post-employment obligations.
- Record-Keeping Process: Ensure all leave balances, requests, approvals/declines and communications are documented and accessible to payroll and HR.
Even small improvements to your contracts and policies can prevent bigger issues later - especially when emotions are high and timing is tight.
Pitfalls To Avoid (And How To Reduce Risk)
Most notice period disputes are avoidable with clear communication and consistent processes. Common pitfalls include:
- Assuming unpaid leave automatically pauses notice: It doesn’t. Confirm in writing how unpaid leave will be treated, in line with any award/EA and the contract. When in doubt, seek agreement up front and document it.
- Inconsistent decisions on annual leave requests: If you approve one request but deny a similar one without good reason, employees may allege unfair treatment. Use clear criteria and keep brief notes of your reasoning.
- Unclear evidence rules for personal/carer’s leave: If you expect medical certificates, say so in your policy and apply it consistently. You can ask for reasonable evidence as set out in our guidance on medical certificates.
- Incorrect final pay: Errors around annual leave payouts, public holidays or payment in lieu can lead to underpayment claims. Use a checklist and cross-check calculations against your award/EA and our guide to final pay.
- Overlooking communication: Confirm decisions in writing - especially if you decline a leave request, approve unpaid leave, or agree on how unpaid leave impacts the end date.
Getting the process right also helps maintain a respectful exit experience, which is good for your brand and remaining team members.
Key Takeaways
- Employees can generally access annual leave and personal/carer’s leave during a notice period, subject to your policies, their contract and any award/EA rules.
- Paid annual or personal/carer’s leave usually does not extend the notice period; how unpaid leave affects the end date should be agreed in writing, as there’s no blanket rule that it pauses notice.
- Set clear evidence expectations for personal/carer’s leave and apply them consistently to avoid disputes.
- If working out notice isn’t practical, you can consider a lawful payment in lieu - make sure you document the arrangement and include all required components.
- Prepare final pay carefully, including payout of unused annual leave and any applicable entitlements, and cross-check against your award/EA and contract.
- Strong foundations - solid Employment Contracts, a clear Leave Policy and a Staff Handbook - make notice periods smoother and more compliant.
If you’d like a consultation on managing employee leave during a notice period for your workplace, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
