What happens when sick leave and holidays collide

18 October 2012
What happens when sick leave and holidays collide

Where do employers stand when it comes to workers on holiday taking sick leave - and vice versa? Legal expert Rebecca Lawton explains

The Problem
With many changes to the law regarding the inter-relation of workers' holiday and sickness absence, I'm not sure where I stand when employees are ill on holiday, or those on long-term sick leave take holiday.

The Law
Workers' holiday rights are set out in the Working Time Regulations 1998 (WTR). Workers in the UK are entitled to 5.6 weeks' paid holiday each year and this statutory entitlement is broken down as follows:

â- An additional 1.6 weeks granted by the WTR (additional statutory entitlement).

Under the WTR, workers are not permitted to carry forward their basic statutory entitlement into the next holiday year and may carry forward their additional statutory entitlement only if agreed with their employer. It is lawful for employers to pay workers in lieu of their accrued but untaken holiday only on termination.

Workers seeking to claim holiday pay can bring two claims in an employment tribunal - a holiday pay claim under Regulation 30 of the WTR, or a deduction of wages claim under the Employment Rights Act 1996. Alternatively, they can bring a breach of contract claim in the civil courts.

Some employers also give workers contractual holiday over and above their minimum entitlements; however, this article will deal only with statutory holiday.

Expert Advice
Courts and tribunals have recently determined a number of cases dealing with the overlap of holiday and sickness absence. The following principles have so far emerged from these cases.

What if an employee falls ill before or during their holiday?
If a worker becomes ill before or during a period of leave and, therefore, cannot benefit from that holiday, they are able to take that holiday period at a later date, even if it means carrying that leave period over into the next holiday year. Naturally, employers will be concerned that a policy allowing workers to reclaim holiday in this manner may be open to abuse, so must consider how best to address that issue.

Can an employee take holiday while on sick leave?
Workers continue to accrue their basic statutory entitlement during any period of sickness absence and are able to take holiday during that time. However, employers should not force workers on sick leave to take holiday against their wishes, as this could expose the employer to claims for constructive dismissal and (if they are disabled) less favourable treatment amounting to disability discrimination.

In practice, it can be beneficial to both worker and employer if the individual takes their holiday while they are on sick leave. For example, if a worker has exhausted Statutory Sick Pay and any contractual sick pay, they may elect to take holiday during their sickness absence in order to benefit from full pay during that holiday period. Employers may prefer workers to take holiday in the current holiday year to avoid dealing with carried-over entitlements in subsequent leave years.

Carrying over holiday
There is no requirement for a worker on long-term sick leave to request for their accrued but untaken holiday to be carried over into the next holiday year, therefore, no "use it or lose it" policy applies. However, as the courts' decisions relate only to the basic statutory entitlement, it is not clear whether employers must permit workers on long-term sick leave to carry forward their additional statutory entitlement. Last year, the Government consulted on proposals to amend the WTR to reflect case law in this regard but the response to this consultation remains outstanding.

Check list
Employers should consider taking the following steps to ensure that they do not act unlawfully:
â- Carry out an audit of the company's template contract of employment and handbook to ensure that HR and managers who manage absences are clear on worker entitlements and company policies.
â- Ensure that adequate absence recording procedures are in place to ensure that any abuse of company policy is flagged and dealt with.
â- Review internal procedures in place for paying individuals on holiday or sick leave and consider the implications of these procedures on any permanent health insurance scheme in place.

This area of employment law is complex and in a constant state of flux. Therefore, until the WTR are amended and the position is clarified, legal advice should be sought before any decisions are taken regarding long-term sickness and holiday.

Rebecca Lawton is a solicitor at Charles Russell LLP

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