No. Under the National Employment Standards, your employer does not pay out unused sick and carer's leave when the job ends, whether you resign, are made redundant or are dismissed. Only annual leave has to be paid out.
For most people that is the whole answer. The exceptions are narrower than many websites suggest, and each has its own rule: cashing out while you are still employed, which only two awards allow; a payout promised in an enterprise agreement or contract; and the tax if an employer pays anyway. This guide sets out all three and puts a dollar figure on what lapses.
Key takeaways
- The Fair Work Ombudsman: "Sick and carer's leave isn't paid out when employment ends." The NES payout rule, s 90(2), covers annual leave only.
- How the job ends makes no difference. If the business is sold and the new owner employs you, the balance moves with you instead of lapsing.
- Cashing out during employment needs an award or agreement term. The FWO says only 2 awards allow it: the Timber Award and the Stevedoring Award. At least 15 days must remain afterwards.
- An enterprise agreement or a contract can promise a payout on exit, because either can give more than the NES.
- A payment for unused sick leave is an employment termination payment: 32% withheld under 60, 17% at 60 or over, inside the 2026-27 caps.
What happens to your sick leave balance when you leave
Paid sick and carer's leave builds up through each year of service and "accumulates from year to year", so a long-serving employee can carry hundreds of hours. On your last day that balance stops having a cash value.
| How your employment ends | Sick leave paid out under the NES? | What happens to the balance |
|---|---|---|
| You resign | No | Lapses |
| You are made redundant | No | Lapses. Redundancy pay and unused annual leave are paid, sick leave is not |
| You are dismissed | No | Lapses |
| You retire | No | Lapses |
| The business is sold and the new owner employs you | No | Carries over: your service, and with it your balance, is recognised by the new employer |
Fair Work Ombudsman, Final pay (updated 28 September 2026): "Sick and carer's leave isn't paid out when employment ends." Fair Work Act 2009 s 96(2): the entitlement "accrues progressively during a year of service ... and accumulates from year to year." Fair Work Ombudsman, Employee entitlements on a transfer of business (updated 13 May 2026): "a new employer has to recognise an employee's service with the old employer when working out most of their entitlements, including: sick and carer's leave". All retrieved 7 October 2026.
Sick leave vs annual leave on termination
The two balances are treated in opposite ways when a job ends, which is where most of the confusion comes from.
| Question | Annual leave | Sick and carer's leave |
|---|---|---|
| Paid out when your job ends? | Yes, at what you would have been paid had you taken it | No |
| Where the rule sits | Fair Work Act s 90(2) | No payout rule in the NES |
| Business sold to a buyer that is not an associated entity | The old employer pays it out if the buyer does not recognise your service | The buyer must recognise your service, so the balance carries over |
The Final Pay Calculator adds up what your last pay must include. Annual leave has its own rules for converting leave to cash during employment, covered in cashing out annual leave. If you get leave loading when you take annual leave, it is added to the annual leave payout: see leave loading on termination.
"If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave." AustLII consolidation. Transfer of business: the old employer "has to pay out the employee's untaken accumulated annual leave" where service is not recognised (FWO). Retrieved 7 October 2026.
The exceptions
Cashing out while you are still employed
Section 101 lets a modern award or enterprise agreement allow sick leave to be cashed out, but only on three conditions: at least 15 days must remain after each cash-out, each one needs a separate written agreement, and you must be paid at least what you would have received for taking the leave. For a full-time employee on 38 hours, 10 days is 76 hours, so the 15-day floor is 114 hours.
Very few employees have this option. The Fair Work Ombudsman says most awards do not allow it, and names only two that do: the Timber Award and the Stevedoring Award. Some online summaries name a coal mining award instead, but the FWO list has only these two. An enterprise agreement can also allow it. Either way, a cash-out happens while you are employed. It is not a payout on exit, and the floor means part of the balance always stays as leave.
Fair Work Act 2009 s 101(2): the terms must require that leave "must not be cashed out if the cashing out would result in the employee's remaining accrued entitlement to paid personal/carer's leave being less than 15 days", that "each cashing out of a particular amount ... must be by a separate agreement in writing", and that "the employee must be paid at least the full amount that would have been payable to the employee had the employee taken the leave". Fair Work Ombudsman, Cashing out sick and carer's leave (updated 7 August 2026): "Only 2 awards allow employees to cash out sick and carer's leave. These are: Timber Award; Stevedoring Award." Paid sick and carer's leave: "Suzanne gets 76 hours of paid sick and carer's leave per year." Retrieved 7 October 2026.
A payout clause in your agreement or contract
The NES is a floor. An award, registered agreement or contract can set different sick leave entitlements as long as they are not below that minimum, so a clause that pays out unused sick leave when you leave is lawful. It is enforceable as a term of that agreement or contract, not as an NES right. If the promise is only in your contract, note that the Fair Work Ombudsman says it cannot help with final pay entitlements that do not come from the NES, an award or an enterprise agreement.
Paid sick and carer's leave: "A registered agreement, award or contract can set out different entitlements to paid sick and carer's leave, but they can't be less than the minimum in the National Employment Standards." Final pay: "We can't help with final pay entitlements that don't come from: the National Employment Standards (NES), an award, or an enterprise agreement." Retrieved 7 October 2026.
If your employer pays it anyway: tax
A payment for unused sick leave is taxed as an employment termination payment, not as an unused leave payment. That makes it different from an annual leave or long service leave payout. It is a non-excluded ETP, so the cap is the smaller of the ETP cap ($270,000 for 2026-27) and the whole-of-income cap ($180,000, not indexed) less your other taxable payments that income year.
| Taxable component | Under 60 | 60 or over |
|---|---|---|
| Up to the smaller cap | 32% | 17% |
| Above the cap | 47% | 47% |
The ETP tax calculator runs the numbers for a sick leave payment. Unused annual leave is taxed differently, as explained in tax on an annual leave payout. No super is payable on a sick leave payment, as set out in super on termination payments.
Non-excluded ETPs include "a payment for unused sick leave". Withholding on the taxable component up to the cap: 32% under preservation age, 17% at preservation age or over; 47% above the cap. The whole-of-income cap "for the 2026-27 income year is $180,000. This amount is not indexed." ato.gov.au, retrieved 9 September 2026. ETP cap $270,000: ATO key superannuation rates and thresholds (updated 17 April 2026).
What your balance is worth when it lapses
Multiply your balance in hours by your base hourly rate and you have the value that disappears on your last day. None of it is owed to you under the NES. It is what the hours would have paid had you been sick and taken them.
| Balance | $30/hour | $40/hour | $50/hour |
|---|---|---|---|
| 76 hours (1 year full-time) | $2,280 | $3,040 | $3,800 |
| 152 hours (2 years full-time) | $4,560 | $6,080 | $7,600 |
| 304 hours (4 years full-time) | $9,120 | $12,160 | $15,200 |
| 760 hours (100 days) | $22,800 | $30,400 | $38,000 |
Use accrued sick days to work out the hours you have banked from your start date and weekly hours, or the sick leave calculator for your yearly accrual.
Can you use up your sick leave before you resign?
Only for days you are genuinely unfit for work. Paid sick leave is for when you cannot work because of a personal illness or injury, and your employer can ask for evidence. Without that evidence when it is requested, s 107(4) takes away the entitlement. Taking well days as sick leave in your notice period is not a way to turn the balance into cash.
A large balance does its real work while you stay. It pays you through an illness, and while paid sick leave covers the whole of an absence, the Fair Work Ombudsman says you cannot be dismissed because of that absence, no matter how long it runs. The detail is in can you get fired for too many sick days.
Fair Work Ombudsman, Paid sick and carer's leave: "Full-time and part-time employees can take paid sick leave if they can't work because of a personal illness or injury. Employees must provide evidence to their employer if requested." Fair Work Act 2009 s 107(4). Fair Work Ombudsman, Long periods of sick leave (updated 10 August 2026): "Employees who use paid sick leave the whole time can't be dismissed by their employer because of their absence, regardless of how long they're on leave." Retrieved 7 October 2026.
State system employees in WA
If your employer is in Western Australia's state system rather than the national one, the answer is the same. The WA Government says there is no minimum entitlement for personal leave to be paid out on resignation, redundancy or dismissal, and that unused leave carries over each year. Where a business is transferred, a WA award may require your personal leave to move to the new employer.
Worked example: one balance, three outcomes
Rosa is 45 and works full-time, 38 hours a week, on a base rate of $35 an hour. She has 230 hours of sick leave banked when she resigns on Friday 4 December 2026. What those hours are worth depends entirely on the instrument that covers her.
| Rosa is covered by | What she gets for 230 hours |
|---|---|
| The General Retail Industry Award (no cash-out term) | $0. The full $8,050 (230 x $35) lapses |
| The Stevedoring Award, cashing out before she resigns | Up to 116 hours (230 less the 114-hour floor) = $4,060, by a separate written agreement while still employed. The remaining 114 hours lapse on exit |
| A contract that pays unused sick leave on exit | $8,050 gross, taxed as an ETP |
For the contract payout, Rosa has had $40,000 of other taxable payments in 2026-27. Her cap is the smaller of $270,000 and $180,000 less $40,000, which is $140,000, so the whole $8,050 sits inside it. At 32%, $2,576 is withheld and she receives $5,474. Had she been 60 or over, the rate would be 17% and $1,368.50 would be withheld.
Is sick leave paid out: questions
Do you get sick leave paid out when you resign?
No. Unused sick and carer's leave is not paid out when employment ends. Your final pay must include untaken annual leave, but not sick leave.
What happens to unused sick leave in Australia?
It carries over from year to year for as long as you stay with the same employer, and lapses when you leave. The one exception is a sale of the business where the new owner employs you: the balance moves to the new employer.
Is personal leave paid out on termination?
No. Personal leave and sick leave are the same NES entitlement, so the same rule applies. See personal leave vs sick leave.
Do you get sick leave paid out when you are made redundant?
No. Redundancy pay and unused annual leave are paid, sick leave is not. The redundancy calculator works out the redundancy pay.
Can I cash out my sick leave?
Only if the Timber Award, the Stevedoring Award or your enterprise agreement allows it. At least 15 days must remain afterwards, and each cash-out needs its own written agreement.
My contract says unused sick leave is paid out. Is that allowed?
Yes. A contract or agreement can give more than the NES minimum, so the clause is valid and you can enforce it as a term of your contract.
How is a sick leave payout taxed?
As an employment termination payment: 32% withheld under 60, 17% at 60 or over, up to the smaller of the ETP cap and the $180,000 whole-of-income cap for 2026-27, and 47% above it.
Do you still get paid if you're sick?
Yes, if you are full-time or part-time and have paid sick leave banked. Check your balance with accrued sick days.
Can I take all my sick leave before I resign?
Only for days you are actually unfit for work, and you must give evidence if your employer asks for it.
Fair Work Act 2009 (Cth) s 90(2), s 96, s 101, s 107 (AustLII consolidations). Fair Work Ombudsman: Final pay; Cashing out sick and carer's leave; Paid sick and carer's leave; Employee entitlements on a transfer of business; Long periods of sick leave. WA Government, Personal leave. All retrieved 7 October 2026. ATO, Schedule 11, retrieved 9 September 2026.
Author & reviewer
Sarah has spent over a decade advising Australian SMBs on Fair Work, NES compliance, and payroll. Based in Sydney, she has worked across hospitality, retail and professional services.