What Happens When an Employee Runs Out of Sick Leave?

Managing long or frequent employee absences can be complex. Once an employee has used all of their paid Personal/Carer’s Leave, your obligations shift - and so does your risk. Here’s what employers need to know when an employee’s sick leave runs out.

What Happens When Paid Sick Leave Runs Out?

Under the National Employment Standards (NES), full-time and part-time employees accrue 10 days of paid Personal/Carer’s Leave each year. Once this entitlement is exhausted: You may offer annual leave, but you cannot require it.

Employees can opt to use their annual leave to continue being paid, but you cannot direct them to take it. If they choose not to, or have none left, the absence becomes unpaid leave.

Documenting this offer is critical. It demonstrates transparent communication and helps prevent disputes about whether leave was forced.

The 3-Month Temporary Absence Protection

A common misconception is that employers can terminate employment once sick leave is exhausted. In most cases, they cannot.

The Fair Work Act protects employees from dismissal if they are temporarily absent due to illness or injury. Under the legislation, a temporary absence is defined in a specific way. An employee loses this protection if:

• the employee’s absence extends for more than 3 months, or
• the total absences within a 12-month period exceed 3 months (whether from one illness/injury or several),

and

• the employee is not on paid personal/carer’s leave for the entire duration of the absence.

Even once temporary-absence protection no longer applies, dismissal is not automatic. Employers must still rely on clear medical evidence showing the employee cannot perform the inherent requirements of their role, even with reasonable adjustments. This requires careful evidence gathering and medical clarity.

What if You Suspect Leave Abuse?

Medical certificates from registered practitioners must generally be accepted at face value, even if the timing feels questionable. You should only raise concerns with the employee if you have clear, objective evidence that contradicts the information in the certificate.

Importantly, being on sick leave does not mean an employee must stay home. Going to the chemist, attending medical appointments, taking a short walk, or doing light personal errands can be completely consistent with recovery. Employers should not assume misuse of leave simply because the employee was seen outside.

Concerns should only arise where there is strong, contradictory evidence, such as attending an event or activity that plainly conflicts with the limitations described in the certificate. Even then, the focus should be on the conduct or dishonesty, not rejecting the medical certificate outright. Any investigation must follow your normal disciplinary process.

Never contact the medical practitioner directly without the employee’s explicit consent.

What Can You Do if the Absence Becomes Long-Term?

While every case is different, employers should follow a structured, fair, and well-documented approach. This reduces legal risk and provides clarity for the employee and the business.

Step 1: Communicate Early and Clearly
Once sick leave is exhausted, write to the employee confirming their leave status has moved to unpaid and offering annual leave as an option. Ask for ongoing medical updates.

Step 2: Monitor the Temporary Absence Period
Keep track of dates so you know when the three-month protection period is likely to end. Avoid any decisions about termination during this time.

Step 3: Seek a Medical Assessment if Capacity Is Unclear
As the protection period nears its end, and if the prognosis remains uncertain, you can request an Independent Medical Examination (IME).

The request should outline:

• the inherent requirements of the role
• the purpose of the assessment
• what information you need to determine whether the employee can safely return to work

An IME provides stronger, more objective medical evidence than a standard GP certificate.

Step 4: Consider Reasonable Adjustments
Before any decision is made, assess whether the employee could return with modified duties, reduced hours, equipment, or other changes. Document all adjustments considered - even if they’re not viable.

Step 5: Make a Decision Based on Evidence
If robust medical evidence confirms the employee is permanently unable to perform the inherent requirements of the role, and no reasonable adjustments would allow a safe return, you may have grounds to end the employment on the basis of incapacity.

Any termination must be based on medical evidence, not the employee’s illness itself. Careful documentation is essential.

Why Getting This Right Matters

These cases are among the highest-risk areas for employers because they often overlap with:

• general protections laws
• discrimination laws
• unfair dismissal
• workers compensation
• WHS obligations
• privacy and medical records requirements

A structured, supportive, evidence-based approach helps you:

• protect the business from legal risk
• maintain trust with the employee
• set a clear roadmap for managers
• reduce the likelihood of disputes or claims

Minimise Your Risk Through Expert Advice

Long-term illness and injury cases require careful navigation. Our Employee Experts work with businesses every day on managing capacity, medical assessments, reasonable adjustments, and compliant processes that reduce risk and treat employees with dignity.

If you’re dealing with a situation like this or want to strengthen your internal processes, we can help: