Holiday entitlement and sick leave - some clarity?

There has been plenty of confusion surrounding how workers holiday entitlements (given by the Working Time Regulations) react with sickness absence.

After several years of conflicting UK and European Court decisions, we're finally getting close to some clarity about what access people have to holiday entitlement when they're sick.

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

Our Crunch advisors are only able to answer accountancy related questions. If you have an employment question please either leave a comment below or phone the Acas Helpline on 0300 123 110.

Do you accrue holiday entitlement if you're 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're too ill to take it (and/or be paid in lieu for any leave they're unable to take if their employment is terminated).

It’s also accepted that if an employee chooses to take their holiday leave entitlement while on sick leave, they’d 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'd continue to receive this during any annual leave pay period.  Employers shouldn’t insist that employees do this, though.

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, since 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); 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 six years). This ruling supersedes UK WTD Legislation and UK Tribunal decisions since then have backed up the ECJ's decision.

The UK Court of Appeal in the summer of 2012 ruled that employees on long-term sick leave are automatically entitled to carry forward their annual leave into the next holiday year (they don't have to 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 four 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 roll over 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 - carry-over of untaken leave cannot be for an indefinite period, but the actual period needs to be defined, hopefully by the government.  A case in 2013 said a time limit of 15 months or more to carry over accrued leave is likely to be enforceable.

Finally, in July 2015, the Employment Appeal Tribunal, in Plumb v Duncan Print Group Limited decided that untaken holiday can be carried forward for "at most" 18 months after the end of the leave year in which that holiday accrued.  This effectively 'stops the clock' so that if a worker fails to request for their accrued and untaken holiday within 18 months of the holiday year in which they were off sick, then the holiday will be lost.  Both parties may appeal this decision.

This case also confirmed that a worker doesn't need to prove they were physically unable because of sickness to take holiday during the leave year - the employer must assume that if the employee doesn't ask to take holiday while sick, this means the employee wishes to carry it forward to the following year.

In June 2019, the Advocate General to the European Court of Justice gave his opinion that EU Member States are free to impose their own conditions on the carry-over and expiry of annual leave that is above the four weeks statutory entitlement (under the original EU Working Time Directive).

The Advocate General felt that as long as the minimum four weeks paid annual leave is protected then Member States may make their own agreements for the carry-over of any additional annual leave the Member State gives.

This opinion is consistent with existing UK case law. The Advocate General’s opinion is not binding but is usually followed by the ECJ (CJEU) when they are giving their full judgement, which is expected later.

The CJEU gave their judgement in November 2019 which confirmed this - the 20 days holiday derived from the original WTD must be carried over is an employee is off on long-term sick leave and unable to take their holiday.

However, any additional entitlement to holiday (such as the extra eight holiday days given in the UK under the WTR, plus any additional holiday provided by the employment contract) will only be required to be carried over into the next leave year if that is required under domestic law or the employee’s contractual terms - in the absence of either there is no requirement for additional holiday to also be carried over.

‍For details of your pay rights during your notice period if you're off sick go to this link.

‍A case that reached the ECJ (European Court of Justice) in 2014 confirmed that annual leave accrued before the death of an employee, while they were still employed, must be paid to the estate of that employee.  The ECJ concluded that the Working Time Directive cannot be interpreted as meaning that entitlement to paid annual leave is lost because of the workers' death.

Can you carry over holidays where you have been unable or unwilling to take it that is not related to sickness?

In December 2014 an Employment Appeal Tribunal (in The Sash Window Workshop Limited v King) said there could be a delay in taking holiday for reasons other than for sickness.

It said carry-over of leave into the next year could also apply whenever a worker “was unable or unwilling because of reasons beyond his control to take annual leave” and where his employment was then terminated, he would then have a right to payment on termination of employment, in lieu of holiday pay owed.

In this particular case though, the EAT felt that it was not known whether King had been prevented by reasons beyond his control for taking annual leave (even though his employer had never paid for his holidays as he regarded him as self-employed and was engaged under a “self-employed commission only” Salesman contract.

King was dismissed at age 65, so to bring a claim of age discrimination and unpaid holiday King had to argue that he was a worker rather than self-employed) so submitted the case back to a Tribunal for reconsideration.  This case was appealed to the EAT and then the Court of Appeal, who referred the case to the ECJ.

In June 2017 the Advocate General of the ECJ gave his opinion that where a worker is “prevented” from taking leave where he had been wrongly classed as self-employed (so had no right to paid holiday) then the right to paid leave carries over until he has the opportunity to take it/or on termination of employment the worker has the right to payment in lieu of leave that remains outstanding, and there is no time limit.

The full ECJ decision was published at the end of November 2017 and confirmed that a worker is entitled to payment in lieu of accrued leave for the whole period he was entitled to holiday where he was denied the possibility of taking it (because it wouldn’t be paid).  

The ECJ also said that the worker did NOT need to take the leave he was due on an unpaid basis, in order to bring a claim for its payment (in this case King did take holiday at times but was not paid for it). They also clarified that the right to paid annual leave accrues and carries over without limitation in time, until the end of the employment relationship (in this case up to 13 years) – so claims could potentially go back to the introduction of the Working Time Regulations in 1998.

This case, again, only applies to the first 20 days of holiday in each year. IMPORTANT NOTE – this judgement suggests that other workers who are wrongly classified as self-employed could also be able to claim back pay in lieu for unpaid annual leave going back to when their ‘worker’ status can be established.

The case will now return to the UK Court of Appeal to implement the ECJ’s decision, and for the CoA to decide how much compensation King will receive.

In October 2015 in Shannon v Rampersad & Rampersad t/a Clifton House Residential Home an Employment Tribunal said that holiday pay could be carried forward in non-sickness related cases only where the reasons for not taking the leave were beyond the worker’s control.

Shannon worked on-call in a care home at night but was allowed to sleep during those hours (responding to any requests for assistance by a night care worker on duty; which was very rare) and he received free accommodation in a studio flat in the care home.  He was paid the NMW for the times when he did work.

Shannon did not take any holidays after the Working Time Regulations were introduced in 1998 and on his dismissal, the Tribunal had to consider whether he could carry forward all his paid leave entitlement (which amounted to £15,000).

The Tribunal (and the Employment Appeal Tribunal) found that he could have requested paid holiday but chose not to, so, therefore, he could not carry forward his past entitlement to be paid in lieu of holiday.  Shannon said he did not ask his employer for holiday because he was frightened of doing so but the Tribunal did not accept this.

Carrying over leave because of the coronavirus pandemic (2020)

The government announced on 27th March 2020 that workers who have not taken all of their statutory annual leave entitlement in 2020, due to the coronavirus pandemic, will now be able to carry it over into the next two leave years

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 on SSP

In the UK it is estimated that about 45% of the workforce is 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 three days of sickness absence).

Sick Pay is only payable when a worker is medically unfit to do their job.  Therefore a worker who can't, for example, fly or go swimming because of a minor infection, may still be fit to do their job and therefore wouldn't be entitled to sick pay.

Our Crunch advisors are only able to answer accountancy related questions. If you have an employment question please either leave a comment below or phone the Acas Helpline on 0300 123 110.

If you are an Employer and need ongoing professional help with any staff/freelance issues then talk to Lesley at The HR Kiosk - a Human Resources Consultancy for small businesses – our fees are low to reflect the pressures on small businesses and you can hire 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.