Recent case law has determined that, if an employee us unable to take planned holiday because of illness, the employer is likely to be acting unlawfully if they refuse any request to either carry the untaken leave forward or to reschedule it

The Working Time Regulations (WTR) state that employees are entitled to 5.6 weeks annual leave in a leave year and that so long as it says so in the employment contract, 1.6 weeks of this entitlement can be carried forward to the next leave year. The remaining 4 weeks must be taken in the leave year in which it accrues.

There are proposals to amend the WTR to make it compatible with European case law decisions. If this happens, the proposed new rules in the Government's Consultation on modern workplaces would make it clear that workers who hadn't been able to take holiday, or who had become ill while on a pre-planned holiday, would be able to carry the holiday forward into the next leave year if they cannot re-schedule it in the current leave year.
Some measures are being considered to reduce the impact on UK businesses and these may include limiting the carrying over of holiday to working time European directive of four-weeks leave entitlement, rather than the entire 5.6 weeks entitlement. Some other proposals include allowing employers to state that employees need to use up all holiday accrued in the current leave year, so long as there has been an opportunity to do that, and allowing employers the right to require employees to postpone taking their holiday until the next leave year, if the employer has good reasons for doing that. The response from the Government on this consultation has not yet been published.

Understandably there will be concern from employers about employees abusing the accrued holiday/sickness absence issue. For example, an employee returns from holiday in what appears to be good health but says that as they have been ill for some or all of their break they would like to reschedule their holiday to a later date

Therefore some practical actions employers might like to consider are:

    Include in the sick policy that the employee will need to notify their employer if they are sick whilst on holiday i.e. ask them to report the sickness to their manager on the first day, and let it be known that medical evidence may be required for any period of illness
    For illnesses during holidays employers might consider limiting pay to statutory sick pay rather than contractual sick or holiday pay
    Only consider rescheduling holiday if the illness meant that the employee would have been unable to do their job
    To manage the costs implications of these potential changes employers might also want to limit the amount of holiday carry over that an employee who is off sick to statutory rather than contractual holiday.

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