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Long-Term Illness

HR Policies

20 June 2025 (Last updated 3 Dec 2025)

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It can be challenging when one of your employees has a long-term illness. You have to balance your concern for their health with the needs of your business. If you don’t want to expose your business to the risk of a claim, you can neither terminate their employment due to their long-term illness, nor can you treat them less favourably because of their illness.

What is considered long-term sickness?

The definition of long-term sickness can vary from employer to employer. Under the Fair Work Act, an employee is protected from dismissal, when on a temporary leave of absence due to illness or injury, for up to three consecutive months or three months over the last twelve months.

An employer may be on sick leave as long as the employer allows it. An employee has a right to request absence from work due to illness and injury, but an employer can ask the employee to provide reasonable evidence to support their request and to pay any entitlements. Once the employee has no more paid sick leave left they can be on unpaid sick leave.

Things to remember

When an employee runs out of paid sick leave and is still unfit for work, they can take unpaid leave in the form of extended sick leave. If they are absent due to illness for at least three months either consecutively or over the last year, or longer if they have lodged a workers’ compensation claim, they may not be protected from dismissal if they are on unpaid leave at the time. Even so ending the employee’s employment may still not be lawful if no procedurally fair process is followed. Employers are advised to tread with extreme caution with respect to actions they take, including termination of employment, in these circumstances.

One safeguard is to have an absence policy. Always treat employees on sick leave in a fair and reasonable way and avoid medical discrimination in the workplace.

Creating a Long Term Sickness Policy

Keep your employees informed when it comes to long-term sickness with a long term sickness absence policy in your employee handbook.

The policy should set out the expectations and procedures for employees, employers and management to follow in case of absence due to sickness. Some of the key information to include is: What is classified as a long-term illness? What reasonable evidence do employees need to provide? How much sick leave are employees entitled to receive? Can they use holiday or annual leave entitlements if they run out of paid sick leave? What is the process for returning to work?

Make sure your employees read and understand the long term sickness policy and have them sign off on it to confirm they have understood.

Causes of Long-Term Sickness Absence

A long term sickness absence can be caused by a range of diseases or conditions, or due to a long recovery from an injury. A long term sickness can be either physical or mental.

Some causes of a long term absence due to sickness include:

  • Cancer treatment
  • Recovery from surgical procedures
  • Recovery from joint, ligament, tendon or muscle injury
  • Mental stress or mental illness
  • Serious infection or disease

Long-Term Absence Due to a Disability

Be careful how you manage an employee who is absent for a long period of time due to a disability. Section 351 of the Fair Work Act states that you must not take adverse action against an employee (e.g. by terminating their employment) because of a physical or mental disability.

There are circumstances where may be unreasonable for an employee with a disability to return to work at your workplace. For instance, if the disability:

  • Prevents the employee from being able to fulfil the inherent requirements of their position
  • Poses a health and safety risk to the employee and other staff, clients, and customers.

When an employee with a disability is not able to perform their current role, you must consider any reasonable adjustments that could be made to allow the employee to return to work.

You could try to modify or reduce the number of tasks the employee performs in their current role. Or you could offer suitable alternative employment within the company with a role that better fits the employee’s needs. Alternatively, you could negotiate with the employee to set up a flexible working arrangement (e.g. reduce work hours due to ill health), so they can return to work.

Any suggestions made by the employee should be considered in depth. Where an employee is not able to perform the inherent requirements of the role, even with reasonable adjustments, there may be a valid reason for a capability dismissal and a defence against a claim.

Flexible Working Arrangements

Employees who have worked for the same employer for more than 12 months can request a flexible working arrangement to return to work if they have a disability.

Requests for a flexible working arrangement must be in writing and clearly explain what kind of changes they are asking for, and the reason for these changes. Depending on the specific needs of the employee they can request to change their:

  • Work hours (e.g. reduce work hours due to ill health)
  • Patterns of work (e.g. split shifts or job sharing)
  • Location of work (e.g. transfer to a closer branch or work from home)

The employer should meet with the employee to discuss the request in further detail. Keep in mind you should not simply outright refuse a request for a flexible working arrangement. You should discuss the options and to try to agree on any changes to the employee’s working conditions.

You should consider:

  • The needs of the employee
  • Consequences for the employee if changes in working arrangements aren’t made 
  • Any reasonable business grounds for refusing the employee’s request.

You must respond to a request for a flexible working arrangement in writing within 21 days which states whether you accept or refuse. As an employer you have a right to refuse a request for a flexible working arrangement only on reasonable business grounds. You should set out the reasons for refusal in writing and you should consider and offer any available alternative working arrangements when responding to the request.

Dismissing an Employee with a Long-Term Illness or Injury

While an inability to perform the inherent requirements of a role may generally provide a valid reason for a capability dismissal, dismissing an employee on the grounds of their capability is risky and a fair and reasonable process must be carried out.

Employees are protected from dismissal on the grounds of illness, injury or disability through a number of overriding pieces of legislation, including the Fair Work Act 2009 (the Act), state and federal discrimination legislation, and state and territory workers compensation legislation.

Under the Act, employers are prohibited from dismissing an employee due to a temporary absence from work due to a personal illness or injury.

An absence is no longer temporary where:

  • The total length of absence due to illness is more than three consecutive months
  • The total length of absence is a total of more than three months over a 12-month period
  • The employee is not on paid personal leave at the time of termination

The above indicates that if an employee continues to receive paid personal leave they will be protected from termination. Whereas an employee whose absence is made up of a combination of paid personal leave and other entitlements (such as annual and unpaid leave) will however not be protected.

You should consider reasonable adjustments that could be made to allow the employee to return to work before contemplating dismissal. If no reasonable adjustments are available, you may have reasonable grounds to commence the capability dismissal procedure and give the employee their notice of dismissal and final pay.

The Act also provides that an employer must not take adverse action against an employee due to the person’s disability.

Anti-discrimination and disability discrimination legislation also make it unlawful for employers to discriminate against an employee on the ground of the employee’s disability. This includes circumstances where an employee is terminated.

In addition, state and territory workers compensation legislation can also prohibit employers from dismissing an employee within a specific period of time from when an employee incurs a workplace injury.

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