Long-term sickness and holiday pay
26 May 2009
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A recent European Court decision in the case of Stringer v. HMRC means that employees taking long-term sickness absence will still be entitled to holiday pay, possibly increasing the cost of sickness absence to your business.
The ruling essentially provides three outcomes:
  • Nothing prevents a national government allowing a worker who is on sick leave to take paid holiday entitlement during that sick leave period.
  • They may not prevent a worker who has been unable to take holiday leave during a year in which sickness intervened and therefore carrying that entitlement over into another leave year.
  • They cannot prevent a worker being paid for accrued holiday leave where they have been on sick leave in a period ending in the termination of their employment relationship.
In practical terms that could mean that workers who are long-term sick could take paid annual leave unless the Government passed laws to prevent this happening, or an employer postpones leave under the Working Time Regulations (WTR).
 
However, doing that may then bring into play the fact that the worker could request that this is carried over into the next leave year. The current regulations make no provision for this, but the judgment is quite explicit in that this should not be prevented. It may, however, be different if the worker chose not to request the leave as opposed to the employer postponing the leave and so preventing the worker taking it in a particular leave year.
 
Where the employment relation is terminated, the worker will be entitled to pay in lieu.
 
The case will now be remitted back to the House of Lords either towards the end of 2009 or some time in 2010 and then some clarity may be achieved or the government may have to make some changes to the WTR.
 
What should employers do?
 
First of all, don't panic, there is still some interpretation of the law to be resolved. However, it becomes crucial that you manage absence effectively and efficiently because the past benefit of absence not costing could be lost.
 
Employment contracts must be reviewed to ensure that any holiday entitlement above and beyond the minimum permitted under the WTR does not continue to accrue during sickness leave.
 
In view of the increased holiday costs, employers should look to recover in other areas. This may be a good business reason to reduce or end company or occupational sickness benefit. However, before taking such a step make sure that you take advice on the exact process and reasons.
 
Employers will now need to look closely at long-term absence and act more decisively. In the past many companies have allowed the sickness to continue, for years in some cases. Now the possibility of financial cost for no return in many businesses means that termination on the grounds of ill health needs to be examined much more closely.
 
Employers would need to have medical evidence and should take advice on the overall process to be followed.
 
The jury is still out on the exact impact of this case but employers need to be looking at their processes and contractual benefits. Non productive cost is the last item that employers need in the current economic climate so many will be well advised to seek professional help to reduce potential future costs.
 
About the author
 
This article was provided by Qdos Consulting, who provide the FPB's 24-hour legal helpline and legal expenses insurance package.


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