The information in this article is the Fair Work Ombudsman’s preferred view of how section 117 of the Fair Work Act 2009 applies when an employee is on leave. There is unlikely to be any certainty about this view unless the matter is settled by a superior court. You may wish to seek independent advice. An applicable industrial instrument or contract of employment (or other legislation) may have different terms about notice or leave that could affect this information.

An employee’s employment can end during a period of leave, including when they’re on unpaid leave.

Employee resigns

An employee can resign while they’re on leave or before they take leave.

When this happens, they need to give their employer any required notice. Employees should check the relevant award, enterprise agreement or contract of employment for rules about giving notice.

The employee notice period can run at the same time as paid or unpaid leave (or other absences, such as on public holidays).

The employment ends at the end of the notice period.

During the notice period, employees get paid in the same way as if they hadn’t given notice. This means:

• if the leave is paid, they get their normal leave pay
• if the leave is unpaid, they won’t usually be paid.

Employer dismisses employee

An employer can dismiss an employee while they’re on leave or before they start leave. The usual rules about ending employment apply, including rules about unfair dismissal and redundancy. For example, an employee can’t be dismissed because of a temporary absence from work due to illness or injury. Employers should check the relevant award, enterprise agreement or contract of employment for rules about giving notice.

If an employer dismisses an employee, including during a period of leave, they need to give the employee notice in writing (some exceptions apply).

The employer can choose to:

• give the minimum period of notice
• pay out the notice period (also known as pay in lieu of notice), or
• give a combination of the two.

The notice period can run at the same time as paid or unpaid leave (or other absences from work, such as a public holiday).

For more information go to:

• Notice of termination and redundancy pay
• Long periods of sick leave

Giving the employee notice

If an employee who is on leave is given notice, their employment ends at the end of the notice period. They get paid during the notice period in the same way as if they hadn’t been given notice. This means:

• if the leave is paid, they’ll get their normal leave pay
• if the leave is unpaid, they won’t usually be paid.

What if the notice period ends after the leave period?

If an employee’s leave ends before the minimum period of notice is met, either:

• the employee returns to work after the leave and works until the notice period ends, or
• the employer gives pay in lieu of the remaining notice period.

Paying out the notice period

If the employer chooses to give pay in lieu of notice, the employment ends immediately.

Pay in lieu of notice is based on the employee’s full rate of pay for their usual hours. For example, an employee who is entitled to 3 weeks' notice will get 3 weeks' pay at their full rate for their usual hours.

This is the case even if the employee is on unpaid leave.

If the employee was taking paid leave, their leave may also have to be paid out.

Example

Dan has 8 weeks of accrued annual leave. With his manager’s approval, he starts an 8 week holiday.

During Dan’s leave there’s a restructure, and at the end of his 5th week of leave, his role is made redundant.

Dan’s employer Sandra decides to pay out his 2 week notice period, ending his employment immediately.

Sandra pays him:

• 2 weeks’ notice
• the remaining 3 weeks of annual leave
• 6 weeks’ redundancy pay.

Dan gets a total of 11 weeks’ pay.

For more information go to:

• Notice of termination and redundancy pay
• Resignation and notice
• Long periods of sick leave
• Final pay

For information on how notice interacts with unpaid parental leave or workers compensation, see:

• Ending employment during parental leave
• Ending employment during workers compensation.