The Human Resource Consultancy Service - Business Matters 15 June 09

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Employees accruing holiday entitlement whilst on long term sick.

A long awaited decision has come out from the House of Lords who ruled last week that workers CAN accrue holiday entitlement whilst on long term sick. This decision is not good news for employers and could be very costly.

The decision centred around a claim from a tax inspector who complained that HM Revenue and Customs wrongly made a deduction from his wages, involving holiday pay, when he was ill.

The judgement found that workers also have a right to carry over holiday leave that they are unable to take while ill, into the following year’s allocation – or to have it paid to them in lieu. The Law Lords concluded that “the purpose of a “holiday” from work is, at least in part, the psychological and social wellbeing of the employee”. They said that a holiday could be considered as similar to wages in terms of being something that was due to the employee whether they were ill or not.

So what does this mean for employers?

An employee who returns to work after a year of illness would legally be entitled to four weeks’ holiday immediately
Managing absence will increase in complexity by allowing workers to take accrued holiday when they return to work
This is a direct contradiction to the Working Time Regulations which, until now, have stipulated that all holiday leave must be used within a year or lost as a cost and efficient way of dealing with holiday entitlement. There will be serious financial and practical implications for employers across the UK. Employers should examine their records and start to maintain a record of holiday entitlement for absent staff.

At HCS we believe that long term absence is the most damaging area of absence for businesses – costing the economy £5.3billion in the latest known figures, for 2007. We can carry out an audit of your business’ absence record and provide advice and guidance to help you tackle this problem and immediately improve productivity and performance.

15 June 2009, webeditor