Long-Term Sick Leave: Accrual and Carry-Over of Holiday Days

Jul 17, 2015
Under Regulation 13 of the Working Time Regulations 1998 (WTR) full time employees are entitled to a statutory minimum of 5.6 weeks (28 days) annual leave comprised of four weeks ‘statutory’ annual leave and 1.6 weeks ‘additional’ annual leave, which represents the number of public holidays in the UK.  

Employers are free to set any holiday year they desire and employees must ensure that they take their four week statutory holiday entitlement within the holiday year set by their employer. If an employee does not take the full entitlement they may risk losing it (save for certain defined exceptions). Employees have no right to carry forward unused statutory annual leave into the next holiday year. However, they are able to carry forward their additional 1.6 weeks annual leave and any contractual annual leave in excess of the statutory minimum subject to agreement with their employer. 

Employers cannot make payment in lieu of holiday entitlement except on termination of employment. Under Regulation 14(2) WTR, upon termination, employees are entitled to payment in lieu of any accrued but untaken holiday entitlement.

In recent years the courts have considered in detail how this position applies to employees who are on long-term sick leave and therefore not in the office to take their annual leave entitlement. 

1. Accruing Holiday During Sick Leave 
An employee on long-term sick leave continues to accrue holiday during this period. If an employee is prevented from taking their statutory four weeks annual leave due to illness they are entitled to carry forward their holiday entitlement to the next holiday year and take their accrued holiday upon their return to work (Stringer v HMRC). Where an employee is on long-term sick leave and not in receipt of sick pay they are entitled to elect to take their holiday and receive paid holiday whilst being on sick leave (Stringer v HMRC). However, the right to carry forward holiday when on sick leave only applies to the statutory four weeks holiday and not to the additional 1.6 weeks (Sood Enterprises v Healy).

2. Forcing Employees on Long-Term Sick Leave to Take Holiday
Although an employee can elect to take holiday they must not be forced to do so by an employer (Pereda v Madrid Movilidad SA).  Employees must be entitled to carry their holiday allowance forward into the next holiday year if they so wish.

In NHS Leeds v Larner, the UK Court of Appeal considered the decisions in Pereda v Madrid Movilidad SA and Stringer v HMRC and held that employees on long-term sick leave must be entitled to carry forward their four weeks of statutory holiday allowance and that Regulation 13(9) (payment in lieu of holiday) should be interpreted as "save where the worker was unable or unwilling to take it because he was on sick leave".  

3. Limits to the Right to Carry-Forward Holiday Entitlement
However, the courts have taken the view that employee’s rights to carry forward such holiday cannot be unlimited. In KHS AG v Winifred Schulte the Advocate General provided a non-binding opinion that the length of time employees should be allowed to carry forward their holiday allowance will depend on the specific circumstances of the employee and illness but that carrying forward for more than 18 months would result in the holiday no longer serving its purpose.

In the recent case of Plumb v Duncan Print Group Limited the Employment Appeal Tribunal (EAT) attempted to answer two key questions in relation to an employee’s right to carry forward holiday entitlement whilst on sick leave. Firstly, whether employees have to show that they were unable to take their holiday for the reason of illness to be entitled to carry forward their statutory entitlement; and secondly, whether the right to carry forward holiday should be unlimited.

Mr Plumb had been on long-term sick leave for four years and when dismissed for incapability sought to claim a payment in lieu of his untaken holiday allowance on the grounds that he had been unable to take his annual leave due to his illness. 

Following the decision in NHS Leeds v Larner, the EAT held that Mr Plumb was not required to show that he was unable to take his holiday as he could not be forced to take it and could choose not to and following the opinion of the Advocate General in KHS AG v Winifred Schulte, it was held that his right to carry forward holiday was not unlimited and that Regulation 13(9) of the WTR should be interpreted as ‘permitting an employee on long-term sick leave to take his holiday within 18 months of the end of the holiday year in which it accrued.’

Darren Hayward

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Darren Hayward

Darren joined Nockolds in 2003 and is the firm’s Managing Partner and Partner in charge of our Employment Law Team. 
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