Updated 2013.

There has been plenty of confusion surrounding how workers holiday entitlements (given by the Working Time Regulations) react with sickness absence. With several years of conflicting UK and European Court decisions, we are finally getting close to some clarity about what entitlements people have to holiday entitlement when they are sick.

Here we break down what we know so far. It is a rather confusing subject, so please bear with us!

Do you accrue Holiday entitlement if you are off work on sick leave?

In January 2009 the European Court of Justice ruled that workers are entitled to accrue statutory minimum holiday entitlement while on sick leave and can carry that leave over into another year if they are too ill to take it and prefer not to take it during their sick leave (and / or be paid in lieu for any leave they are unable to take if their employment is terminated).

Following other cases, it has now been accepted that workers continue to accrue annual leave entitlement during sickness absence.

And it is also accepted that if an Employee chooses to take their holiday leave entitlement while on sick leave they would be paid normal holiday pay rather than company or statutory sick pay (which may be less or none depending on how long they have been off sick) for the days they treat as annual leave. If you qualify for SSP you would continue to receive this during any annual leave pay period.

What was still in doubt was the issue of carrying over unused leave (accrued because of sickness absence) into the next leave year. The UK referred this to the UK House of Lords in May 2009 as the way the UK Law on the Working Time Directive is written conflicts with the 2009 decision by the ECJ – the law in the UK requires workers to use their holiday entitlement within the leave year or lose it (unless an agreement exists to the contrary), while the EC Directive itself is silent on this issue but ECJ case law has said carry over of leave is allowed.

The House of Lords ruled that people who are denied to accrue holiday pay while on sick leave can make a claim to an Employment Tribunal for an ‘unauthorised deduction from wages‘ (with claims possibly being able to be back-dated as far back as 6 years). This ruling supercedes UK WTD Legislation and UK Tribunal decisions since then have backed up the ECJ’s decision.

Finally, in 2012 UK case law clarified this position further so now we wait for the Government to amend the Working Time Regulations.

So, until the summer of 2012, workers at UK institutions that are defined as an ‘emanation’ of the state (i.e. public sector workers) could rely directly on the European Working Time Directive and ECJ decisions, so can roll over their untaken holiday (accrued during sickness absence) into the next leave year. However, private sector workers were unable to do so as their holiday entitlement is governed by the UK Working Time Regulations.

Now, the UK Court of Appeal in the summer of 2012, has ruled that employees on long-term sick leave are automatically entitled to carry forward their annual leave into the next holiday year (even if they do not request to do this) and are entitled to be paid for this outstanding leave if their employment is terminated.  The case in question was NHS Leeds v Larner.  The Judges in this case commented that they considered that it was possible for all UK workers to take the same position, not just public sector workers - this does not mean a precedent for private sector workers to have similar treatment has been set, but the Judges’ comments are seen as highly ‘persuasive’ that this should be the case.

This decision, however, only deals with the 4 weeks statutory leave entitlement that is provided by the original EU Directive and not the additional 1.6 weeks that is provided by the UK Regulations.  It remained unclear whether all workers were entitled to rollover the additional 1.6 weeks leave until March 2013 and the case of Sood Enterprises Ltd v Healy, when the Employment Appeal Tribunal held that Employers are not required to carry over the additional 1.6 weeks leave (provided by UK Regulations).

It is also unclear how many years of leave this can continue for – it is clear that they carry-over of untaken leave cannot be for an indefinite period but the actual period needs to be defined, hopefully by the Government.

Now for some clarity at last?

In 2011 the Government consulted on making changes to the WTR to reflect the issues about carrying over leave because of sickness absence – and proposed that the Regulations were amended to allow the 4 weeks statutory leave to be rescheduled or carried over in the next leave year for all workers. The outcome of the consultation has not yet been published but it is expected this will be the result.  Therefore Employers need to consider how their policies and contracts of employment are worded regarding this issue.  The Government were expected to amend legislation in 2012 but this has still not happened.

News on sickness during scheduled Annual Leave

The summer of 2012 has also bought more clarity to the issue of when a worker is sick while they are on annual leave. Previous decisions by the European Court of Justice made it clear that where is a worker was unfit for work before the start of a period of paid annual leave, they were entitled to take that leave at another time (which did not coincide with the period of sick leave).

Now, the latest case from the ECJ says that it is irrelevant when the sickness incapacity starts – it can be during a period of annual leave, it does not have to be before the start of the annual leave.  So, workers who fall sick during their annual leave have the right to re-take that leave at a later date, even if this is carried over into the next leave year.

The Government consultation, mentioned above, is likely to include this issue in their amendments to the UK Working Time Regulations

Notes for Employers:

  • In the UK it is estimated that about 45% of the workforce are only entitled to SSP (they have no company/contractual sick pay on top).  Therefore in financial terms it may not make sense for an employee to want to be paid SSP while on holiday as it is likely that their holiday pay will be more generous than their entitlement to SSP (and SSP is not available for the first 3 days of sickness absence).
  • Sick Pay is only payable when a worker is medically unfit to do their job.  Therefore a worker who cannot, for example, fly or go swimming because of a minor infection, may still be fit to do their job and therefore would not be entitled to sick pay.

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If you are an Employer and need ongoing professional help with any staff/freelance issues then talk to us at The HR Kiosk (click here) - a Human Resources Consultancy for small businesses – you can retain us for as much time as you need.

Please note that the advice given on this website and by our Advisors is guidance only and cannot be taken as an authoritative or current interpretation of the law. It can also not be seen as specific advice for individual cases. Please also note that there are differences in legislation in Northern Ireland.

Photo by Lali Masriera