When an employee is absent from work for a substantial period, this inevitably means that they do not have an opportunity to use their holiday entitlement.
If an employee is terminated after a period of long-term absence, are they entitled to be paid for all the holidays they will have accrued?
Case law has shown that employers cannot avoid paying holiday pay to which an employee is entitled to upon the termination of their employment due to long-term absence/sickness.
Employees Accrue Holidays while On Long-Term Sickness Absence
If an employee does not have the opportunity to take any of the annual leave they have accrued, they can carry it over to the next holiday year.
However, how much leave can an employee carry forward? Employees are not entitled to carry over unlimited amounts of holiday.
The courts have reached a conclusion that it must be taken within 18 months of the end of the year during which the employee was unable to take the leave.
Importantly, 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.
Employees Do Have The Right To Have Their Holidays Reallocated
Another point which the courts have clarified is that employees can reclaim holidays that they were unable to take due to sickness.
Employees do have the right to have their holidays reallocated if they cannot take them due to sickness.
Although employees will be entitled to be paid or carry over holidays untaken, what they can carry over must fall in line with EU law and the Working Time Regulations.
Under the Regulations, employees are only entitled to the minimum 4 weeks’ holiday as given in EU law, and not the additional 1.6 weeks that the UK gives, or any contractual entitlement that may be provided for.
It would be best practice to check your employment contracts, to check the general limits on carrying over holiday.
You may want to consider operating a different policy for entitlement to annual leave than that which is dictated by the Regulations.
It is also worth bearing in mind that you will not be able to prevent an employee who is on sick leave using their holiday, if they have ran out of entitlement to sick pay. Therefore those employees with the knowledge and whose sick pay has run out, may request to take holiday from the previous year so they do not lose it.