6.4.2 Incapacity Payments and the Use of Sick Leave

Last amended: 10 October 2013

On occasion, whilst in civilian employment, a person will make use of their sick leave entitlement as a result of their accepted condition. The use of this leave entitlement is considered to be a loss that may entitle a former member to compensation on the basis of the formula NE less AE.

The most appropriate way to compensate a former member for this loss is to not include in AE the amount of paid sick leave. This is because this situation is relevantly similar to a situation in which a client, rather than making use of his leave entitlement during the absence, instead takes a reduction in his earnings in order to pay for the absence (the only difference is the method by which the client pays for the absence: reduction in earnings in one instance; reduction in leave entitlement in the other). Just as we exclude from AE the amount a client fails to earn as a result of working less hours due to the accepted condition, we should exclude from AE the value of the leave entitlement the client has lost as a result of the accepted condition.

Therefore, in such an instance, the AE of the person will be equal to the gross earnings minus the value the leave taken as a result of the accepted condition. It is imperative that only the leave taken as a result of the accepted condition is included in the above calculation.

This rule also applies to those former members who are working in the Public Service. The concern that removing the paid leave from gross earnings in order to calculate AE will result in a 'doubling up' of Government payments is misplaced. The Commonwealth does not pay for the leave taken by this person. Rather, the person himself pays for this leave by making use of his leave entitlement. By taking the leave for his accepted condition, the person is unable to use this leave for anything else. So it is an actual loss with a dollar value - and the person should be compensated for this loss. Of course, if the agency the person is employed by had paid for the person's absence without this affecting the leave entitlement, then there would be a 'doubling up' of payments from the Commonwealth in the event that the paid leave were removed from the gross earnings in order to calculate AE.