Holiday Pay and Sickness

Holiday Pay and Sickness


There have been a number of new cases and developments either shedding light on the entitlement to annual leave and holiday pay or raising yet more questions about this endlessly complicated area. Mandeep Kalsi of Turbervilles Solicitors sets out the current position.


Annual Leave Entitlement 

The Working Time Regulations 1998 (“WTR”) sets out the relevant law on annual leave:

• a worker is entitled to 4 weeks’ annual leave in each leave year
• leave to which a worker is entitled under this regulation may be taken in instalments, but


(a) it may only be taken in the leave year in which it is due
(b) it may not be replaced by a payment in lieu of untaken leave, except where the worker’s contract is terminated.


The minimum statutory annual leave entitlement was increased in April 2009 to 5.6 weeks. So, if you’re a full-time worker working 5 days a week), you are entitled to 28 days’ (or 5.6 weeks) leave per year; and if you work, for example, a 3 day week, you are entitled to 16.8 days’ leave (that is, 5.6 weeks x 3 days). This is a right from the first day of your employment and is not subject to any particular length of service. If you begin your employment part way through a leave year, you are entitled to a proportion of this 5.6 weeks’ minimum leave.


It is important to note that the statutory minimum entitlement to annual leave is capped at 5.6 weeks (or 28 days). This means that if you work 6 days a week, you would still only be entitled to receive 28 days by law. However, your employer can contractually increase your annual leave entitlement above the statutory minimum but there is no obligation upon them to do so.


If you have a contractual right to annual leave, you cannot claim this contractual right on top of your rights under the WTR. In such a situation, you may take advantage of whichever right is, in any particular respect, the more favourable.


Exercising the Right to Annual Leave: Notification  

If you wish to take annual leave, you need to give your employer a certain amount of notice. Under the WTR, this is twice as long as the leave to be taken. However,if your employment contract specifies a different notice period, then this should be observed.

Your employer may refuse your leave request or require you to take leave on particular dates (whether or not you have made a request). If your employer wishes to specify dates on which leave must be taken, the notice period is the same as the notice period you would need to give to take leave. If your employer is simply refusing your request, the period of notice must be at least as long as the period of leave requested. Employers are not required to give reasons for refusing annual leave requests, although many find that doing so is good practice.

If you do not follow the requirements that apply to you (whether this is in your contract of employment or under the WTR), you cannot insist on taking your holiday at the time requested.

The Employment Appeal Tribunal (EAT) considered whether an employer has the right to insist that an employee gives notice as required in his contract of employment before being eligible to take holiday, even where the employee’s leave year is due to come to an end and he is likely to lose that holiday. It ruled that the employee was bound by the notice provision in his contract of employment.


Under the WTR, you must be paid a week’s pay for each week of annual leave to which you are entitled.

If your employer pays for additional days of holiday over and above the statutory minimum entitlement, this will normally be written as part of your contract and might be different from that paid for annual leave under the WTR.

Normal working hours and ‘pay’ 
In calculating a statutory week’s pay, the issues for determination are two-fold:

(1) do you have normal working hours?; and if so,
(2) what are they?

Once this has been established, the next question is: what counts as ‘pay’ for the purposes of a week’s pay?

Previously decided cases on a week’s pay defined it as ‘money, paid by the employer under the contract, in respect of work done by the employee.’ Put simply, this means your gross pay (including bonuses, shift premiums, commission and allowances). However, holiday pay, sick pay, payments in kind and genuine reimbursement of expenses are excluded.

Rolled up pay
The principle of “rolling up” holiday pay effectively means that you will not be paid any wages at the actual time that you take your annual leave. It means instead that you are paid a specific sum which relates to holiday, as part of your normal wage.

“Rolling up” holiday pay is compliant with the WTR as long as it is clearly stated in your employment contract and is agreed. The specific amount or percentage that you are being paid for holiday should be clearly identified.

Annual Leave Disputes 

The WTR provides that you may present a complaint to an employment tribunal alleging that your employer has refused statutory annual leave or has failed to make a payment (which includes less than the correct amount of holiday pay) in respect of such leave. You must present your complaint to a tribunal before the end of a three-month period beginning with the date on which the leave should have been permitted or, the payment should have been made.

If an Employment Tribunal upholds your complaint, it will make a declaration to that effect and may award compensation to be paid to you by your employer. The amount paid is that determined by the employment tribunal to be just and equitable in all the circumstances. If the claim relates to the failure of the employer to pay the whole or part of any sum due under the WTR, the employment tribunal shall award the amount due to you.

A complaint relating to a failure to make payment in respect of annual leave can also be pursued under the Employment Rights Act 1996 (ERA).

Pay Accrued Holiday During Maternity Leave 

In the UK, you continue to accrue statutory and contractual holiday entitlement during the 26-week period of Ordinary Maternity Leave. In practice, this permits you to take whatever paid holiday has accrued either before or after maternity leave.

You are also entitled to Additional Maternity Leave of a further 26 weeks. All of the terms and conditions (except those relating to wages) are now preserved during the additional maternity leave. You will therefore accrue holiday entitlement at the statutory and contractual rate during both ordinary and additional maternity leave.

Accrued Holiday and Sickness: Taking annual leave during sick leave

This is a grey area, which has generated interest and confusion as well as most of the recent important case law.

A recent case examining the interaction between the right to paid annual leave under the WTR in cases of long-term incapacity, was sent to the European Courts of Justice (ECJ).

Headline points derived from the ECJ case are:

  • someone on sick leave does accrue holiday despite not working but it is for Member States to decide whether paid annual leave can be taken during a period of sick leave or not
  • at the end of a leave year, someone on sick leave who has been unable to take holiday (for example, because the Member State does not permit it) must be allowed to carry it over
  • the right to be paid in lieu of accrued but untaken holiday on termination of employment applies even if someone has been on sick leave for the whole or part of the leave year.

So, where does this now leave you if you have issues regarding non-payment (or under-payment) of holiday pay? Enforcement of the claims brought by the claimants could be made under both the ERA and/or the WTR. Consequently, you can take advantage of the more generous time limit for bringing a claim under the ERA – which allows you to bring the claim within 3 months of the last deduction in a series of deductions (going back to 1998) – as opposed to the more restricted time limit under the WTR, that is, within 3 months of the date on which it is alleged that the payment should have been made.

The House of Lords unfortunately left unresolved the question of whether carry over of accrued untaken holiday is permitted under the WTR although from the ECJ’s judgment, it would appear so.

A New Period of Annual Leave Following Sickness

The question of whether you can request a new period of annual leave following a previous period having been used-up by sickness was dealt with in another ECJ case.

The ECJ emphasised that the entitlement to paid annual leave is to be regarded as a fundamental principle of community law which cannot be taken away. You are entitled to paid annual leave for the following year even if you have been on sick leave for part, or all, of the previous leave year.

In the ECJ’s view, if you are on sick leave during a period of previously scheduled annual leave you have the right, to take that leave during a period which does not overlap with the period of sick leave. The scheduling of the new period of leave is subject to national laws and the interests of the business, carry over must be permitted in these circumstances. The ECJ went on to say that although the WTD does not preclude national laws or practices which allow someone on sick leave to take paid annual leave during that sick leave, if you do not want to take annual leave during a period of sick leave, annual leave must be granted in a different period.

This case also potentially means that if you fall sick whilst on a period of annual leave you could ‘claim back’ your holiday entitlement. Although the case related to someone who fell ill before the period of holiday began, the decision gives confidence to the argument that an employee who falls ill whilst on holiday could require their employer to credit them back with the ‘missed’ holiday days. This does, however, raise concerns of abuse, as you can self-certify for the first 7 days of sickness.

Calculating Annual Leave Entitlement on Termination

According to the WTR, when employment is terminated during the course of the leave year and on the termination date, the proportion the worker has taken of the leave to which he is entitled is less than the proportion of the leave year which has expired, the worker’s must make a payment in lieu of leave.

This payment must be either a sum provided in the contract or other relevant agreement or a sum determined according to the formula (A x B) - C where —

A = the period of leave to which you are entitled

B = the proportion of the leave year which expired before the termination date

C = the period of leave taken by you between the start of the leave year and the
termination date

The legal circumstances on holiday pay and sickness are continually evolving, it is important to stay aware of the changes in this area. You can also find information from the Advisory Conciliation and Arbitration Service (ACAS) who have published a brief guide on annual leave entitlements for businesses and individuals.

For employment advice from Turbervilles Solicitors visit or contact Marc Jones, Partner, Employment Department on 01895 201719.

Disclaimer: The author accepts no responsibility for actions taken as a result of the above article. When considering legal proceedings legal advice should be sought.