Update on Holiday Pay and Sickness: “Right to Carry Forward” Limited to Four Weeks Per Year

The Employment Appeal Tribunal (EAT) has handed down an important decision for UK employers, limiting the right of workers to carry forward holiday entitlement accrued during a period of long-term sickness absence.

Under European law, workers are entitled to a minimum of four weeks’ paid holiday each year, which equates to 20 days for full-time workers.

The United Kingdom’s Working Time Regulations go further than this and provide UK workers with a minimum entitlement of 5.6 weeks’ paid holiday each year, which equates to 28 days for full-time workers.

The interplay between workers’ rights to holiday and how those rights are impacted by sick leave has been the subject of much debate in recent years. A particular issue has been to what extent a worker on long-term sick leave, who has been unable to take holiday due to sickness, is entitled to carry forward accrued but untaken holiday to a subsequent holiday year.

In 2012, the Court of Appeal confirmed that workers could carry forward the minimum four week entitlement derived from European law. The Court did not, however, clarify whether the additional 1.6 weeks enjoyed by UK workers ought to be treated in the same way.

That question has now been addressed by the EAT in Sood Enterprises Limited v Healy.

What Did the EAT Decide?

The EAT confirmed that, unless agreed otherwise between the parties, a worker’s right to carry forward accrued holiday applies only to the minimum four weeks provided for by European law. There is no entitlement, in such circumstances, for a worker to carry forward the additional 1.6 weeks provided for by UK legislation.

What Does This Mean for Employers?

This decision is good news for employers. It limits exposure to holiday pay in respect of workers who are absent on long-term sick.

Provided his or her employment contract is drafted appropriately, a worker on long-term sick leave will now only be able to carry forward a maximum of four weeks’ holiday in respect of any given year, as opposed to 5.6 weeks.

With the benefit of this additional clarity, now is a good time for employers to review the sickness and holiday provisions of HR policies and employment contracts.