Holiday pay update

Workers can accrue holiday even when on long-term sick leave, rules House of Lords.

In a recent House of Lords decision on the thorny question for employers and employees of what should be done about accrued annual leave when an employee is on long term sickness absence , Lord Rodger concluded workers had a right to carry over holiday leave which they were unable to take while ill into the following year’s allocation, or that employees are entitled to take pay in lieu. This is a controversial decision and once which impacts on businesses irrespective of size.

Prior to this decision, workers rights under the Working Time Regulations 1998 (WTR) were workers who do not take their holiday during the relevant leave year cannot normally carry it forward to a subsequent leave year, or be paid in lieu of the unused holiday (save on termination).

Lord Rodger stated in the case of Stringer and others v HM Revenue & Customs [2009] that workers on sick leave continue to accrue holiday rights.

Moreover, if they are prevented from taking their holiday because of sickness they must be allowed to take it following their return to work, even if this means carrying the holiday forward into the next leave year

The ruling means an employee who returns to work from a year of illness would legally be entitled to his entire accrued holiday entitlement for the year and which he could take immediately upon his return. Allowing workers to accrue statutory paid holiday entitlement during sickness absence will have serious financial and practical ramifications for employers across the UK.

This will be especially hard on smaller businesses who are already trying to deal with the implications of long term staff sickness. At this time during one of the worst recessions, this could push business and resources to the limits.

It is worthy of note that if an employee absent for period of up to a year or longer employers will have to be mindful of the possibility that the illness may be considered as a disability under the Disability Discrimination Act. Employers who are likely to find themselves facing this possibility should tred carefully in respect of managing the return to work of such an employee and will be well advised to seek legal advice.

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