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As an employer, you must understand your obligations to your employees. The Fair Work Act includes Australia’s National Employment Standards (NES). These standards provide minimum standards for both employees and employers across Australia. This legislation also outlines the law for carer’s and personal leave and annual leave. To help you better understand your obligations, this article will take you through what personal or carer’s leave and annual leave are and whether you need to pay them out to your employees.

What is Personal or Carer’s Leave?

Personal or carer’s leave is one type of leave available to employees. This leave enables them to take time off work if they are sick or injured. Employees might also take time off to care for a family member who is in need of care. Indeed, this is commonly referred to as sick leave. However, time off for this purpose will come out of the employee’s personal or carer’s leave balance.

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Personal or Carer’s Leave Entitlements

All permanent employees are entitled to ten days’ paid personal or carer’s leave for each year of service with you. Such leave is accumulated progressively and will be cumulative from year to year. In addition, your employees will be entitled to a further two days’ unpaid carer’s leave for each occasion when a member of their immediate family or household requires care or support because of: 

  • personal illness; or 
  • personal injury affecting the member; or 
  • an unexpected emergency affecting the member.

When your employee takes paid personal or carer’s leave, you must pay the employee the base rate of pay they would have received should they have worked over that period. As a result, employees do not have a right to overtime, penalty rates or bonuses.

Paying Out Personal or Carer’s Leave

Unused personal or carer’s leave is not payable upon termination of employment. Accordingly, personal or carer’s leave is treated as a ‘use it or lose it’ entitlement.

What is Annual Leave?

Annual leave, sometimes referred to as ‘holiday pay’, allows your employee to take paid time off work. The NES outlines the entitlement to annual leave, with some awards and enterprise agreements allowing for additional leave provisions.

Annual Leave Entitlements

Full time and part-time employees are entitled to four weeks of annual leave for each year of service with you, which you calculate on a pro-rata basis for part-time workers. Certain awards also provide one week of paid annual leave for shift workers. Annual leave also rolls over from year to year.

You must pay an employee at least their base rate of pay for their ordinary hours during a period of annual leave, unless their award, enterprise agreement or contract provides a greater entitlement. This generally does not include penalties, loadings or bonuses. 

Paying Out Annual Leave

Suppose an award or an enterprise agreement does not cover your employee. In that case, you may make an agreement with your employee for them to cash out an amount of their annual leave, but only where the agreement would leave the employee with at least four weeks of annual leave after the cashing out. You must make each agreement to cash out in writing, and you must pay your employee at least as much as if they had taken the annual leave. 

Most awards also allow you and your employee to agree to cash out annual leave in accordance with the award.

When employment ends, any accrued but untaken annual leave will also be payable on the termination of employment. 

Key Takeaways

Some of the most commonly known types of leave include personal/carers leave and annual leave. Some key things to note about these types of leave is that:

  • certain awards and enterprise agreements allow for your employee to cash out annual leave; and
  • you must pay employees for any unused annual leave they have accrued throughout their employment at the end of their termination.

If you need assistance establishing fair work practices for your employees, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions

What is personal or carer’s leave and annual leave?

Personal or carer’s leave (commonly referred to as ‘sick leave’) is one type of leave available to employees that allows them to take time off work if they are sick or injured, while annual leave allows employees to take paid time off work for an unspecified reason.

Do I need to pay out my employee’s sick and annual leave?

In most instances, employees are not entitled to cash out their sick leave, either during their employment or upon the termination of their employment. Similarly, an award or enterprise agreement will allow your employee to cash out annual leave in some instances. However, you must pay out an employee for any unused annual leave when employment ends.


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