Annual Leave and Sickness: Employer's Guide

The interaction between annual leave and sickness is complex. Understanding the rules prevents costly mistakes.

Key Principles

Annual Leave Continues to Accrue

During sickness absence:

• Statutory leave (5.6 weeks) continues to accrue in full
• Cannot be reduced due to sickness
• Employee on long-term sick still builds leave entitlement

Separate Types of Leave

Sick leave and annual leave are distinct:

• Sick leave = absence due to illness
• Annual leave = time off for rest and relaxation
• One cannot extinguish the other

Accrual During Sickness

Statutory Leave (5.6 weeks)

Always accrues:

• Full 5.6 weeks per year
• Regardless of length of sickness
• Cannot be pro-rated for sick employees

Contractual Leave (above 5.6 weeks)

Your choice:

• Can provide it continues to accrue, or
• Can limit accrual during extended sickness
• Must be clearly stated in contract

Example

Employee has 28 days annual leave (5.6 weeks).

They're off sick for 6 months.

Accrual:

• They still accrue full 28 days (if no contractual limitation)
• If contract limits additional leave accrual during sickness, they'd accrue 28 statutory days

Getting Sick During Holiday

Employee's Right

If employee falls ill during annual leave:

• Can choose to treat those days as sick leave
• Reclaim the annual leave days
• Take them at another time

Applies to: Statutory leave (5.6 weeks). Can exclude contractual additional leave.

Your Requirements

Can require employees to:

• Report the sickness as they normally would
• Provide medical evidence (fit note)
• Follow sickness notification procedure

Example

Employee takes 2 weeks' annual leave.

Gets flu for 4 days during the holiday.

If they report it properly:

• Those 4 days become sick leave
• They reclaim 4 days' annual leave
• They take SSP for those 4 days (if eligible)
• They take the 4 days' annual leave later

Carry-Over Rules

Standard Position

Normally, use it or lose it:

• Leave must be taken in the leave year
• Limited carry-over allowed

When Employee Is Sick

If employee couldn't take leave due to sickness:

• Can carry over up to 4 weeks' statutory leave
• Must use within 18 months of the year it was accrued
• Applies to leave they couldn't reasonably take

What This Means in Practice

Situation	Carry-Over Allowed
Off sick all year, couldn't take any leave	Up to 4 weeks
Off sick part-year, had opportunities to take leave	Only leave they couldn't take
Short-term illness, plenty of time to take leave	Normal carry-over rules

The 18-Month Limit

Carried-over leave due to sickness:

• Must be taken within 18 months
• If not taken, it's lost
• Clock starts at end of leave year

Example

Leave year: January-December 2024

Employee is sick January 2024 - August 2024.

Returns in September, has 20 days accrued but untaken.

They can:

• Take what's possible in Sept-Dec 2024
• Carry over the rest (up to 4 weeks)
• Use carried-over leave by end of June 2026

Requiring Leave During Sickness

Can You Make Them Take Holiday While Sick?

Generally no:

• Purpose of annual leave is rest and relaxation
• Can't achieve that purpose while sick
• Employee should remain on sick leave

Exceptions

Employee may choose to:

• Take annual leave instead of sick leave (their choice)
• This might give them more money (annual leave vs SSP)

You cannot require this.

Taking Holiday to Recover

After Sickness

Employee returns from sickness, wants to take annual leave immediately:

• This is their right (subject to normal approval)
• Don't refuse unreasonably
• They may need rest after illness

Before Returning to Work

Employee wants to take annual leave before returning:

• Can do this
• Receive full pay for holiday (not SSP)
• Then return to work

Pay Considerations

During Sickness

• SSP only (unless contractual sick pay)
• Annual leave accrues but isn't taken

Holiday Pay After Sick Leave

When employee takes accrued leave after sickness:

• Pay at normal holiday pay rate
• Based on average earnings (including recent sick period?)
• Use appropriate reference period

Long-Term Sickness

Managing Leave Accrual

For employees on extended sick leave:

• Track leave accruing
• Communicate leave position regularly
• Plan for return or termination

If Employment Ends

If employee is dismissed or leaves during long-term sickness:

• Pay accrued but untaken statutory leave
• Up to 4 weeks can be owed
• Plus any additional contractual leave if applicable

Example Calculation

Employee on sick leave for full year. Employment ends.

Owed:

• 5.6 weeks' statutory leave
• Minus any taken
• Paid in final pay

Policy Considerations

What to Include in Policy

1. Notification: How to report sickness during holiday
2. Evidence: What evidence required (fit note?)
3. Reclaiming days: Process for reclaiming leave
4. Additional leave: Whether contractual leave can be reclaimed
5. Carry-over: Rules on sickness-related carry-over

Sample Policy Wording

Sickness During Annual Leave

If you fall ill during annual leave, you may reclaim those days as annual leave by:

• Notifying us on the first day of sickness as per normal procedure
• Providing a fit note if the illness lasts 7+ days
• Confirming which days you wish to reclaim as annual leave

Reclaimed days will be treated as sick leave. You will receive SSP (if eligible) or sick pay for those days and may take the reclaimed annual leave at another time.

This applies to statutory annual leave only. Contractual leave above 28 days cannot be reclaimed.

Common Scenarios

Scenario 1: Long-Term Sick, Leave Year Ending

Employee has been sick all year. Leave year ends in 2 weeks.

Action:

• Calculate leave accrued and untaken
• Confirm they can carry over up to 4 weeks
• Remind them of 18-month limit
• Document the position

Scenario 2: Sick During Booked Holiday

Employee books 2 weeks' leave. Gets sick 3 days before.

Options:

• Cancel annual leave, go on sick leave
• Take annual leave as planned (if well enough)
• If falls sick during leave, report and reclaim

Scenario 3: Long-Term Sick, Wants to Take Holiday

Employee on long-term sick wants to use annual leave.

Generally acceptable if:

• They're well enough to benefit from the break
• Consider OH advice
• Could be part of phased return

Pay: Full holiday pay, not sick pay.

Scenario 4: Termination During Sick Leave

Employee on long-term sick is dismissed.

Must pay:

• Accrued statutory leave (up to 5.6 weeks per year)
• Any carried-over leave from previous year
• Any additional contractual leave (if applicable)

Record Keeping

Track

• Leave accrued (ongoing)
• Leave taken
• Sick leave periods
• Reclaimed holiday days
• Carried-over leave and deadline

Why It Matters

• Correct final pay
• Avoid disputes
• Demonstrate compliance
• Manage liability

Checklist

During Sickness Absence

• Continue to accrue statutory leave
• Track leave balance
• Communicate leave position periodically
• Apply contractual rules to additional leave

When Employee Gets Sick on Holiday

• Record sickness notification
• Request evidence if required
• Process as sick leave for those days
• Restore annual leave days
• Pay SSP (if eligible) for sick days

At Leave Year End

• Calculate untaken leave
• Apply carry-over rules
• Communicate carried-over amount
• Note 18-month deadline

At Termination

• Calculate all accrued leave
• Include carried-over leave
• Pay in lieu in final pay