Sickness Absence And Holiday Pay

What employers need to know about holiday pay and long term absence. Neathouse Partners show you how easy it is to handle it.


James Rowland

Commercial Director James leads Account Management, Sales and Marketing at Neathouse Partners.


23 March 2021


17 July 2024
4 min read
Sickness Absence And Holiday Pay

When an employee is absent from work for a substantial period, questions may arise as to their holiday entitlement.

We outline below:

  • What happens to an employee’s holiday entitlement during sickness absence
  • Whether holiday can be taken during sickness absence
  • What happens to holiday that cannot be taken due to sickness absence


Accruing holiday during sickness absence

Employees on long-term sickness absence continue to accrue the holiday entitlement under their employment contract as normal.

However, when an employee is absent from work for a substantial period, this inevitably means that they may not have an opportunity to use all their accrued holiday entitlement.

Carrying holiday into the next year

If an employee is unable to take some or all of the holiday they have accrued due to sickness absence, they are entitled to take it once they return to work. 

If they return to work after the holiday year has ended, they are able to carry their accrued holiday into the new holiday year.

The Working Time Regulations 1998 stipulate that, in the absence of a separate agreement between the employer and employee, only the EU statutory holiday entitlement of 4 weeks (under the Working Time Directive) can be carried across, not the additional 1.6 weeks’ holiday granted in the UK and any further contractual holiday entitlement.

However, we advise checking the terms of the employment contract to establish the general limits on carrying over holiday.

Holiday carry-over due to sickness absence occurs automatically, there is no requirement for the employee to request it.

If an employee’s long-term absence is due to sickness, they do not need to show that they were physically unable to take a holiday, the fact they were off sick is sufficient to entitle the employee to carry over the holiday.

However, employees prevented from taking holiday due to sickness absence are not able to carry over their holiday entitlement indefinitely.

Case law indicates that any holiday entitlement carried over due to sickness absence must be taken within 18 months of the end of the year during which the employee was unable to take the leave.


Taking holiday during sickness absence

Can employees take holiday during sickness absence?

Employees can take holiday during sickness absence and receive full pay for such holiday as normal, irrespective of their entitlement to statutory or contractual sick pay.

Can employers require employees to take holiday during sickness absence?

The Working Time Regulations give employers the discretion to require employees to take some of their holiday entitlement on specific dates during the year.

For example, many businesses require employees to reserve some of their holiday for the Christmas shutdown period.

Employers may be inclined to instruct an employee to use up their holiday entitlement before returning to work from long-term sickness absence.

However, case law indicates that requiring an employee to take holiday during sickness absence breaches the Working Time Directive.

There is also a risk that the employee will bring a discrimination or constructive dismissal claim if only they are required to take holiday.

Can employers prevent employees from taking holiday during sickness absence?

Generally, an employee’s request to take holiday on a specific date is subject to the employer’s authorisation and the employer can reject a holiday request e.g. to maintain staff levels if another employee has already booked holiday at the same time.  

However, refusing the holiday request of an employee off work on sickness absence serves little purpose.

Although an employer can pay the employee less as statutory sick pay than holiday pay, rejecting the employee’s holiday is not cost effective as the employer will have to pay for their holiday once they return to work which will most likely cause more disruption to the business.

There is also a risk that rejecting the employee’s holiday request during sickness absence will result in a discrimination or constructive dismissal claim.

If you do not want employees to take holiday during sickness absence, a safer option would be to introduce a general policy on this to avoid discrimination claims, but as outlined above this approach does carry some disadvantages.


Sickness absence during holiday

Holiday due to be taken during a period of sickness absence 

If an employee has booked holiday and becomes ill and is off work before or during the period in which holiday is due to be taken, they should be allowed to cancel their holiday and take it at another time.

As an employer, you should not force an employee to take pre-arranged holiday during sickness absence against their wishes.

We advise that you ask the employee whether they want to take their holiday if this situation arises.

The employee may still want to take their holiday despite being on sickness absence, for example if they are only entitled to statutory sick pay and not their normal salary.

However, if the employee does not want to use their holiday, it would be best practice for you to allow them to take it at a later date.

If the employee’s sickness absence continues into the next holiday year, you should allow them to carry their holiday entitlement across.

Sickness during holiday 

Similarly, if an employee becomes ill during their holiday, you should allow them to transfer to sickness absence so that they can take the affected days of holiday at another time.

This may raise concerns that employees will take advantage and claim to be sick during holiday to gain extra days of annual leave.

To prevent potential abuse, you could:

  • Require employees to report sickness in the same way as if they were due to work (e.g. call their manager on every day of absence, self-certify sickness of up to 7 days and provide medical certification for sickness that exceeds 7 days).
  • Only offer contractual sick pay in these circumstances if medical evidence is provided which shows the employee is unfit to work, not just that their sickness spoiled their holiday.
  • Effectively monitor sickness absence to detect excessive or patterned absence.

If you only offer statutory sick pay, employees are less likely to want to transfer their holiday to sickness absence, as there is a 3-day waiting period before SSP kicks in and even if they do receive SSP it will be a lower amount than holiday pay.

We advise against refusing to reschedule holiday that is affected by sickness absence as this is likely to be a breach of the Working Time Regulations 1998.


Pay in lieu of holiday upon termination of employment

If an employee’s employment terminates following a period of sickness absence, they will be entitled to pay in lieu of holiday they have accrued during their absence, including any holiday that has been carried over to the new holiday year, but they still been unable to take.

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