Retail surgery: Is a long-term sick employee entitled to holiday pay?

Normally an employee is only entitled to receive a payment in lieu of any accrued and untaken holiday when the employment relationship ends. However, major difficulties have arisen where the employee has been absent from work on long-term sick leave. The big question for retailers has been did the employee accrue holiday when they were off sick? Until recently the answer has been yes.

But in a recent case, an Employment Appeal Tribunal decided that the ‘use it or lose it’ rule which applies to the right of staff at work to take paid holiday applies equally to those on long-term sick leave.

According to Ray Silverstein, head of the London employment team at law firm Browne Jacobson, employees on long-term sick leave must accordingly do something in order to preserve their right to paid holiday. “Employees should ask that a period of their absence be treated as holiday or alternatively request that the entitlement to paid holiday be deferred until a later period for example, following their return to work. Where deferred holiday is outstanding at the date the employment ends a payment in lieu of the holiday pay may be payable.”

The tribunal also ruled that there is no implied duty for a retailer to ensure their employees have been told to use or defer their holiday entitlement while off.

“It remains to be seen whether the European Court of Justice agrees with this judgment but at least retailers have some helpful clarity on the point for now,” adds Silverstein.