What To Do When Sick Leave Entitlements Run Out In Australia

Running out of paid sick leave can be stressful - whether you’re an employee trying to recover or an employer trying to support your team and keep operations moving.

The good news is there are practical options and legal safeguards you can rely on in Australia.

In this guide, we’ll step through what happens when paid sick leave is exhausted, the lawful options available (like Leave Without Pay, annual leave and reasonable adjustments), your obligations around medical evidence and privacy, and how to approach capability and dismissal risks fairly and compliantly.

We’ll also share the key documents and policies that make managing extended illness or injury far clearer for everyone involved.

What Happens When Paid Sick Leave Runs Out?

Under the National Employment Standards (NES), full-time and part-time employees generally accrue 10 days of paid personal/carer’s leave (often called “sick leave”) per year. Casual employees do not receive paid sick leave, but they still have some protections and may access unpaid leave in certain situations.

Once you’ve used all paid sick leave, the legal position changes. You may still be entitled to time off, but it may be unpaid unless an award, enterprise agreement, employment contract or workplace policy provides something more generous.

If you’re an employer, it’s important to handle this transition consistently and compassionately. Clear communication, a fair process and accurate records will help you manage risk and maintain trust. If you’re an employee, engage early with your employer about your recovery plan and any support you need - there are usually options beyond paid leave.

For a deeper dive on the overall process, it’s worth reading our guide to what to do when sick leave runs out.

Your Legal Options When Entitlements Are Exhausted

When paid sick leave is depleted, consider these common options. The best pathway depends on the medical situation, how long time off is needed, and what your contract or applicable industrial instrument allows.

1) Leave Without Pay (LWOP)

Many businesses allow unpaid leave for illness or injury once paid entitlements are exhausted. This is not automatic; it’s usually by agreement, and terms should be documented. LWOP can give employees space to recover without severing the employment relationship.

Employers should be consistent and apply any policy evenly across the workforce to minimise claims of unfair treatment. A clear process (request form, timeframe, medical evidence, check-ins) helps set expectations on both sides. If you use LWOP regularly, make sure your approach aligns with NES and any award or enterprise agreement, and reflect it in your policies. We’ve set out common rules and considerations in our overview of Leave Without Pay.

2) Annual Leave

Employees can request to use accrued annual leave for illness once paid sick leave is gone. This is generally by agreement and may be a practical option if short additional time off is needed.

Employers should check any relevant award or enterprise agreement for notice requirements and confirmation that annual leave can be used in these circumstances. Ensure payroll is correctly tracking the different leave types and balances.

3) Unpaid Carer’s Leave

The NES provides 2 days of unpaid carer’s leave per permissible occasion for employees (including casuals) who need to care for a member of their immediate family or household. This is different to personal sick leave, but can be relevant if the employee is supporting someone else.

4) Reasonable Adjustments (Fit For Some Duties)

Sometimes an employee can work with modified duties or hours while recovering. Employers should consider reasonable adjustments, particularly in circumstances that may involve disability or long-term health conditions. This might include flexible hours, temporary alternative duties, or remote work options - provided the employee remains safe and the role’s inherent requirements are satisfied.

5) Workers’ Compensation and Return-To-Work Plans

If the illness or injury is work-related, a workers’ compensation claim and return-to-work plan may apply. These processes are state/territory based and have specific assessment and rehabilitation steps. Employers should liaise with insurers and follow the relevant scheme’s requirements.

6) Income Protection or Other Insurance

Some employees hold personal income protection policies or have coverage through their superannuation. These policies may provide a benefit during periods of illness where work is not possible. It’s separate from employment law, but it can impact the best path forward and timelines for return to work.

Managing Fitness For Work And Medical Evidence

Sound decision-making depends on reliable medical information. Employers are entitled to request reasonable evidence to support absences (for example, a medical certificate or statutory declaration), and in some scenarios, further information may be justified to assess fitness for work and the need for adjustments.

Requesting Medical Evidence

If paid sick leave is exhausted and extended absence is requested, it’s reasonable to ask for medical certificates that confirm the diagnosis (if the employee is comfortable sharing it), functional limitations and anticipated timeframes. Keep requests proportionate to what you need to manage safety and make fair decisions.

Where appropriate, employers may ask for a fitness-for-work report or a specialist note that addresses specific duties. You can also ask for confirmation that an employee is fit to return to certain tasks. We explain expectations around seeking a medical clearance and the circumstances where it’s appropriate to request one.

Independent Medical Examinations (IMEs)

In limited cases - for example, where the medical evidence is unclear, or risk and safety issues exist - an independent medical examination may be reasonable. If you go down this path, be mindful of privacy obligations, provide clear terms of reference to the examiner, and pay for the assessment.

Privacy And Sensitive Health Information

Health information is sensitive personal information. Employers should collect only what’s necessary, store it securely, and limit access to those managing the situation. Having a compliant Privacy Policy and internal procedures for handling employee medical information will help you meet your obligations under the Privacy Act.

Can You Be Dismissed If You’re Sick? Risks And Fair Work Rules

There are important protections for employees who are temporarily absent because of illness or injury. Broadly, the Fair Work framework prohibits dismissal for temporary absence due to illness or injury in certain circumstances (including where the absence is less than three months or a total of less than three months in a 12-month period, or where the employee is using paid personal/carer’s leave). Even after those thresholds, other protections still apply - including unfair dismissal, general protections and anti-discrimination laws.

For employers, this means you need a careful, lawful process if you’re considering ending employment because the employee can’t perform the role’s inherent requirements. This includes gathering proper medical evidence, genuinely considering reasonable adjustments, consulting with the employee and weighing alternatives like extended LWOP or redeployment where feasible. Our overview of termination on medical grounds explains the steps and risks in more detail.

Mental health conditions are also protected. Employers must ensure a safe workplace and avoid adverse action or discrimination because of a protected attribute. Training managers, handling conversations sensitively and documenting reasonable adjustments will reduce risk and support your team’s wellbeing. Read more about employer duties in our guide to mental health obligations.

Key point: if capability is at issue, the focus should be on whether the employee can perform the inherent requirements of their role with reasonable adjustments. A fair, evidence-based process is essential before any decision is made.

Practical Steps For Employers And Employees

Here is a practical roadmap you can use, whether you’re an employer managing an extended absence or an employee navigating your options.

Step 1: Check Contracts, Awards And Policies

Start with the paperwork. Confirm what the Employment Contract, any award or enterprise agreement, and your workplace policies say about personal/carer’s leave, annual leave, LWOP, medical evidence and fitness for work. This sets the baseline for rights and obligations and helps avoid inconsistent treatment.

Step 2: Have An Early, Open Conversation

Discuss the likely duration of absence, current limitations and what support is needed. For employers, listen carefully and keep notes. For employees, provide prompt updates and any requested medical evidence. Collaboration at this stage often prevents misunderstandings later.

Step 3: Consider Short-Term Options

• Use any remaining personal/carer’s leave for rostered hours already planned.
• Request or approve annual leave for additional paid time off.
• Agree on LWOP for a defined period with check-in dates.
• Implement reasonable adjustments so work can safely continue, if appropriate.

Step 4: Manage Fitness For Work Properly

Seek proportionate medical evidence. If returning to work after a significant absence, request a targeted clearance confirming what duties are safe. Keep health information confidential and align your process with your Privacy Policy.

Step 5: Monitor, Review And Document

Set review points. If recovery is slower than expected, reassess options. Document all discussions, medical evidence, adjustments considered and decisions made.

Step 6: Assess Long-Term Capability (If Needed)

If an employee cannot perform inherent requirements, even with reasonable adjustments, and there are no suitable redeployment options, you may need to consider the capability and employment status. Use a fair process, consider independent evidence where appropriate, and be mindful of all legal protections that still apply.

Step 7: Plan A Supportive Exit If Employment Ends

If employment needs to end after a fair, evidence-based process, handle it respectfully and lawfully. Consider notice, accrued entitlements, and any obligations under an agreement or policy. In some cases, a negotiated exit may be suitable, often documented as a Deed of Release or an Employee Separation Agreement.

Key Documents And Policies To Put In Place

Being prepared before issues arise makes everything easier. These documents help you manage sick leave transparently and compliantly.

• Employment Contract: Sets out leave entitlements, notice, fitness-for-work expectations and processes around medical evidence. Having a clear, tailored Employment Contract reduces confusion later.
• Workplace Policies (Staff Handbook): A well-structured handbook outlines personal/carer’s leave, annual leave, LWOP, fitness for work, privacy and return-to-work expectations so managers apply a consistent approach. A comprehensive Staff Handbook also supports fairness and transparency.
• Privacy Policy & Procedures: Explains how sensitive health information is collected, used and stored, and who can access it. A compliant Privacy Policy and internal protocols help you meet legal obligations and build trust.
• Medical Evidence and Fitness-For-Work Template: Provide employees with a simple form or letter template their treating practitioner can complete. This ensures you get the functional information needed to plan safe duties or absences.
• Return-To-Work or Rehabilitation Plan: Especially useful where there’s a work-related injury or a longer recovery. Clearly records adjustments, goals, check-in dates and responsibilities.
• Deed of Release/Separation Agreement: If a negotiated exit is appropriate, a well-drafted agreement can provide certainty for both parties and close out issues cleanly.

Common Pitfalls (And How To Avoid Them)

• Not documenting the process: Keep clear records of meetings, medical evidence, adjustments considered and decisions. Good notes can be critical if your decisions are later challenged.
• Requesting excessive health information: Ask only for what you reasonably need to manage safety and capability. Consider whether targeted questions or a fitness-for-work report are more appropriate than open-ended requests. If you need confirmation of readiness to return, a focused medical clearance will often suffice.
• Ignoring reasonable adjustments: Many roles can be adjusted temporarily (or permanently). Explore modifications before concluding a role can’t be performed.
• Inconsistent treatment: Follow your policies consistently to avoid claims of unfairness or discrimination. If you allow LWOP for one employee, consider similar arrangements where circumstances align. A clear framework, like the one outlined in our Leave Without Pay article, helps keep decisions consistent.
• Rushing capability decisions: Ending employment on medical grounds requires a careful, evidence-based process. Our guide on termination on medical grounds outlines the steps to reduce risk.
• Overlooking mental health: Psychological safety is part of your obligations. Proactive support, manager training and a respectful process all matter. See our overview of mental health obligations.

Key Takeaways

• When paid sick leave runs out, there are still options - including annual leave, Leave Without Pay, reasonable adjustments and workers’ compensation pathways.
• Make decisions with good medical information: request proportionate evidence, focus on functional capacity, and manage privacy carefully.
• Dismissal due to illness or injury is tightly regulated; follow an evidence-based, fair process that considers inherent requirements and reasonable adjustments.
• Clear paperwork helps: strong Employment Contracts, practical workplace policies, privacy procedures and fit-to-work templates reduce confusion and risk.
• Keep it consistent and compassionate: document everything, communicate early, and review arrangements at agreed intervals.
• If capability remains an issue after genuine attempts to support a return, seek advice before moving to a separation, and use appropriate documentation if an exit is agreed.

If you’d like a consultation on managing situations where sick leave has run out, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.