The Fair Work Act 2009 (Cth) allows certain employees to cash out their annual leave. However, does it also allow you to cash out sick leave? In most situations, the answer will be no. The exception is where a registered agreement or award that allows for the cashing out of sick leave covers the employee, namely the:

  • Timber Award;
  • Black Coal Award; and
  • Stevedoring Award.

We explore these awards in more detail below.

Timber Award

Under the Timber Award, an employee may request to cash out sick leave instead of taking time off work. This right exists once they have accumulated more than 15 days’ worth of leave.

If the request is approved, the employee may be paid up to:

  • 64 hours (if they are in the General Timber Stream); or
  • 38 hours (if they are in the Wood and Timber Stream).

The employee must make a written request and can only do so once per year.

Employees in the Pulp and Paper Stream can only cash out sick leave upon:

  • retirement;
  • termination of employment after ten years of continuous service; or
  • death (as long as they were still an employee of the business).

Black Coal Award

Under the Black Coal Award, an employee can only cash out sick leave if they have 70 or more hours of untaken sick leave and the employer terminates their employment. Termination may occur by:

  • redundancy;
  • retirement;
  • dismissal by the employer because of sickness; or
  • death.

An employer who terminates an employee while they are on paid sick leave has to pay the employee until their leave runs out or until the employee returns to work.

Stevedoring Award

An employee may elect to cash out sick leave instead of taking time off work once they have accumulated at least 28 days’ worth of leave. They may choose to be paid all or part of their entitlement in excess of the 28 days at their ordinary rate of pay.

The employer will also pay an employee the total amount of their unused sick leave when one of the following occurs:

  • redundancy;
  • retirement;
  • resignation;
  • death; or
  • disablement.

Conditions Apply

If an award or registered agreement that allows for the cashing out of sick leave covers the employee, the following conditions apply:

  • there must be a separate agreement made in writing every time the employee cashes the sick leave out;
  • the employee must have at least 15 days remaining after cashing out their leave; and
  • the employer must pay the employee the full amount the employer would have paid the employee if the employee had taken time off work.

Employee Considerations

An employee should consider whether it is worth cashing out their sick leave before doing so. Accumulated sick leave can provide a safety net which they can use when the employee or one of their family members falls ill or suffers an accident.

However, it is also worth considering that an employee may be entitled to unpaid sick leave if their sick leave has run out.

Employer Considerations

An employer should consider whether allowing employees to cash out their sick leave will result in more employees becoming hesitant to use their sick leave and instead of coming to work while they are sick.

These actions may lower staff performance and make other employees in the workplace sick as well. However, it is also worth considering the financial implications to their business in allowing sick leave to build up and have to pay it out in one lump sum.

Key Takeaways

An employee will only be allowed to cash out sick leave if one of three awards or a registered agreement that allows for this provision covers them. Even if the employee is entitled to this payment instead of time off work, there are numerous conditions and issues to consider before doing so. If you have any questions about cashing out sick leave, get in touch with LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.
Rachel Amiri

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