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Managing Sickness Absence and Annual Leave

14th September 2013

Working Time Regulations 1998

The UK’s Working Time Regulations oblige employers to grant workers a minimum period of paid holiday each year. As such, employees have a statutory entitlement to no less than 5.6 weeks’ paid annual leave (or a pro rata entitlement for those working part time). This equates to 28 days for someone working five days a week. Entitlement is capped at 28, so an employee who works six days a week will only be entitled to 28 days' leave. Public or bank holidays may be included within the 5.6 week entitlement, provided that paid time off is granted on those days

Sickness and Annual Leave - Key Points

Statutory annual leave continues to accrue whilst an employee is on sick leave, regardless of the length of the illness. In addition, employers should note the following key points:

• Where an employee is prevented from taking statutory annual leave due to illness, they must be allowed to take this later in the year, or where this is not possible, in a subsequent leave year.

• If an employee is on annual leave and becomes sick, they can choose to convert their annual leave to sick leave. This will also apply if the employee was on sick leave and this continues into a period of pre-booked annual leave. After returning to work, the employee is entitled to take this unused period of annual leave at a later date.

• An employee is not required to make a request to carry leave forward if they are unable to take statutory annual leave due to a period of long term sickness absence.

• If they wish, an employee may agree to take statutory annual leave at the same time as sick leave in order to receive their normal rate of pay. (Where, for example, an employee’s entitlement to full sick pay has expired.) Employers cannot, however, require employees to take leave during a period of sickness absence.

• The decision of the European Court of Justice (ECJ) in KHS AG v Schulte stated that the EU Working Time Directive does not require unlimited accumulation of holiday when a worker has been on sickness absence for several years. The ECJ suggested a 15-month ‘carry over period’ was lawful.

• If employment is terminated and the employee has been absent due to long term sickness, they are entitled to receive payment in lieu of statutory annual leave which has accrued during their absence and not been taken.

Sood Enterprises Ltd v Healy

Cases handled through the employment tribunal system over recent years have left some unanswered questions in this area. A recent tribunal case, Sood Enterprises Ltd v Healy, has considered the unresolved question of whether the carry-over of annual leave applies to the additional 1.6 weeks’ of statutory holiday entitlement under the Working Time Regulations…

Mr Healy, a handyman and car-wash attendant, was entitled to 28 days’ leave a year (5.6 weeks). After suffering a stroke, he was on long term sick leave from July 2010 until he resigned on 6 June 2011. His sick leave straddled two holiday years and he claimed payment for 17 days’ holiday in 2010 (he had only taken 11 days holiday) and 14 days in 2011 (the pro rata entitlement up to his resignation date).

The employment tribunal agreed that Mr Healy should be paid all the accrued holiday and stated that the additional 1.6 weeks of leave could be carried over into the subsequent holiday year.

However, on appeal, the EAT ruled that Mr Healy was not allowed to carry over the additional 1.6 weeks’ of leave, only the first four weeks. They commented that the Working Time Regulations expressly state that the 1.6 weeks of leave can only be carried over if the employer and employee agree to this. No such agreement applied in Mr Healy’s case. Mr Healy was therefore only entitled to carry forward 20 days into the 2011 holiday year and not the full 28 days. Payment in lieu of holiday pay was therefore nine days for 2010 and 14 days for 2011.

Further Advice and Support

The Government is currently reviewing the UK’s Working Time Regulations in terms of the interaction between sickness and annual leave. In the meantime, if you require advice or support on this topic, please contact our HR Advice Line on 0845 073 0240.


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