Do employees accrue holiday during long-term sick leave? A recent court judgment throws light on the issue, writes Christina Morton, an employment specialist from law firm Withers.

Do employees accrue holiday during long-term sick leave? A recent House of Lords judgment throws light on the issue, writes Christina Morton, an employment specialist from law firm Withers.

UK workers are entitled to a statutory minimum 28 days’ paid annual holiday (pro rata for part-time workers). That might seem straightforward enough, but some of the rules surrounding holiday are notoriously complex.

A judgment from the House of Lords this month has now added some further complications.  The case concerns what happens to holiday entitlement when a worker is on long-term sick leave. Employers generally want to know the following things in these cases:

•    Does holiday continue to accrue during sick leave?

•    Can the worker take holiday whilst they are on long-term sick leave?

•    Can the worker carry over untaken holiday from one year to the next and if so how much?

•    If the worker never comes back to work, does the employer have to pay in lieu of any untaken holiday and if so how much?

•    Do workers have to ask for the leave or is the onus on the employer?

•    What happens if the employer doesn’t pay?

The House of Lords judgment was eagerly awaited by legal advisers, not least because it followed on from a judgment in the European Court of Justice and was therefore expected to give useful guidance on all of these topics. Unfortunately the judgment did not cover all the ground and a number of questions remain unanswered. However the following points are clear:

•    Entitlement to paid holiday does accrue during long-term sick leave.

•    If a worker is on long-term sick leave receiving reduced pay or no pay, and he or she asks for a period of that time to be designated as paid holiday entitlement, that request should normally be granted and full wages paid for the period.

•    If a worker does not ask for holiday because he or she is sick, the entitlement cannot be carried over into the next holiday year and taken as holiday.

•    However, at the end of employment a worker may have a claim for all the accumulated but untaken holiday from previous years.

Employers should now:

•    Check that their policies on holidays and absences reflect the current legal position as closely as possible. In most cases the best course of action will be to pay workers for statutory holiday in the year in which it accrues, even if they are unable to work for the whole of that leave year due to sickness. Not doing so on the basis that the worker may never ask for it will be a risky course of action. Employers who think they face historic claims should take advice.

•    Ensure that paid holiday is given to everyone who is entitled to it – workers as well as employees are entitled to paid annual leave, which covers casual staff and some independent consultants. It could now be very expensive to rectify a mistake if a worker decided to enforce their entitlement to paid holiday after a long period of non-payment.

•    In cases where workers on long-term sick leave are offered permanent health insurance, discuss with the insurance provider how it intends to respond to the judgment and how periods of ‘holiday’ should be dealt with.