Holiday pay when employee is on sick leave

heather · PayPerShop Newbie Joined: 19 Aug 2007 Posts: 4

Hi

Is an employee entitled to holiday pay on termination of contract if they have been on sick leave for 6 months of the year?

thanks in advance
Heather

Ian Whyteside

Heather,

Fundamentally if an employees contract of employment remains in force they are entitled to benefit from those terms even if they are absent, and this applies even when they are on sick leave.

Obviously there will be restrictions, for example the pay may be reduced, the absence may affect calculation of bonus and commission and the employer can restrict the contractual holiday allowance if it is laid down in the terms and conditions clearly enough.

What the employer cannot do is deny an employee their right to the statutory period of paid holiday during sick leave so this will continue to accrue. If the employee leaves before being able to take the leave they are entitled to payment in lieu.

This has been established by a number of tribunal cases since the introduction of the working time regulations. Until now it had been believed that if the sick leave is unpaid then the holiday allowance ceases to accrue.

Now a recent preliminary decision by the European Court of Justice has thrown this view out. An ex HMRC employee took out a complaint against his former employers who refused to compensate him for annual leave not taken to his date of termination. They did this on the grounds that he was on unpaid sick leave and therefore was not entitled. The case went all the way to the House of Lords who then passed the buck to the ECJ.

The advocate general has given a preliminary view, just last month, that employees entitlement to statutory leave continues even during unpaid sick leave and should be paid in lieu if they are dismissed before taking the leave. This would not apply if they resign.

The preliminary view is not binding on the full ECJ which is to be heard later in the year but it is very rare for the full opinion to differ from the preliminary one.

So, it would appear that yes an employee is entitled to receive payment in lieu of holidays not taken when their employment terminates and that the allowance should continue to accrue during the sick leave. Currently this will not apply if the sick leave is unpaid, however, in view of the pending decision of the ECJ I would suggest anyone in this position to lodge a claim with their employers for the additional leave should the ECJ decide as predicted.

Hope this helps and once again I will stand corrected if anyone has a more informed view of things or has practical experience of such events.

Ian Whyteside