Long-term sick leave and holidays

Q. I have an employee who has been on long-term sick leave for almost a year. We are reaching the end of our holiday year and the employee has asked if they can carry forward their holiday entitlement. What should I tell them? They are no longer entitled to sick pay from the company.

Under the Working Time Regulations (“WTR”), workers are entitled to a minimum amount of paid leave in each year and they are not entitled to carry the leave forward from one leave year to the next. The WTR also say that an employer may not pay its workers in lieu of annual leave, except on termination of employment.

Until recently, it was thought that workers could not take annual leave while on sick leave and so if they did not use their holiday in one leave year, they would forfeit their entitlements relating to it (subject to any enhanced contractual entitlement to carry forward). It was a case of ‘use it or lose it’.   

However, the situation has now changed.  The House of Lords has recently said that:

•    sick leave does not reduce a worker’s annual leave entitlement;•    there is nothing to prevent employees taking their annual leave while on sick leave; and•    a claim for payment for untaken holiday leave may be brought as a deduction from wages claim, as well as a claim under the WTR.

This does not change the underlying position in relation to the amount of leave a worker may take in any one leave year, as leave may still not be carried forward. However, it does mean that:

•    you must pay workers while on holiday at their normal salary, even if they are on sick leave and have exhausted any entitlement to sick pay; and•    an affected worker could arguably be entitled to a payment on termination of employment not only for the final leave year (even if they have been off sick throughout the leave year), but for all previous leave years.m It would appear that this is the case whether or not the worker has requested to take the leave.

In your case, you can tell the employee that they may not carry forward the holiday, but you may wish to let them take the holiday now and pay them for it. It may be that the employee is not aware of their rights and is unlikely to claim for holiday at the end of their employment. However, if they do bring a claim, your liability on termination of employment could be significant.

Will Winch is a solicitor in the employment group at Mishcon de Reya

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