Employees on long-term sick leave often raise questions about their holiday rights. HR professionals and business owners must understand the legal framework governing entitlement, accrual, carry-over and payment of annual leave during extended sickness absence. Getting this wrong exposes employers to unlawful deduction claims, Working Time Regulations breaches and, in some cases, discrimination risk. Clear internal processes supported by accurate legal understanding will help prevent disputes and maintain compliance.
What this article is about:
This article explains the rules on holiday entitlement and holiday pay for employees on long-term sickness absence. It covers how holiday accrues during sickness, whether employees can or must take annual leave while off sick, how much leave can be carried over, and what employers must pay on termination. The guidance is designed for HR professionals and business owners who need a practical, legally accurate explanation of how holiday and long-term sickness interact under UK employment law.
Section A: Holiday Accrual During Long-Term Sickness
Employees on long-term sick leave continue to build up statutory annual leave. This principle is set by the Working Time Regulations and confirmed through case law. HR teams must understand the distinction between statutory and contractual entitlements so policies are applied lawfully and consistently. Failure to recognise ongoing accrual can expose employers to significant liabilities, particularly where sickness spans multiple holiday years. It is also important to distinguish between the core four weeks of EU-derived leave and the additional 1.6 weeks of UK domestic leave, as different rules apply to pay and flexibility.
1. Statutory vs contractual annual leave
Statutory annual leave consists of 5.6 weeks per year. Four of these weeks come from EU-derived rights and carry specific protections, including rules on sickness, carry-over and the requirement that holiday pay for this element reflects the worker’s normal remuneration. The additional 1.6 weeks is domestic UK leave with slightly more flexibility in how it is treated, including how holiday pay is calculated, provided the worker still receives at least basic pay for this element.
Employers may offer extra contractual leave beyond the 5.6 weeks, which is treated separately. During long-term sickness, employees continue to accrue all statutory leave. Employers can limit or suspend accrual of purely contractual holiday if the contract expressly allows this, though most do not. Where employers adopt consistent discretionary practice around additional contractual leave, such practice may over time create implied contractual rights, so any changes should be carefully assessed and documented.
2. Accruing holiday during sickness absence
Long-term sickness does not pause or reduce an employee’s statutory holiday entitlement. Even where an employee receives only statutory sick pay or no pay at all, entitlement continues to accumulate at the normal rate throughout the period of employment. This applies to all employees with statutory holiday rights, including those in their first year of employment. Once an employee has started work, their statutory leave year continues to run and holiday continues to accrue even if they are absent for the whole of that year.
Employers should maintain accurate records through HR and payroll systems so that entitlement remains transparent. This includes separating out the four weeks of EU-derived leave from the additional 1.6 weeks and from any extra contractual holiday, so that different rules on carry-over and holiday pay can be applied correctly.
3. Removing enhanced contractual leave during long-term sickness
Where contractual policies or contracts of employment permit, employers may restrict the accrual of enhanced contractual holiday during long-term sickness. This must be drafted expressly and unambiguously. Employers cannot remove any part of the 5.6 weeks statutory entitlement, but they may set rules on additional leave, provided the employee has clear notice of the terms and those terms are not applied in a discriminatory way.
Any attempt to suspend or reduce the accrual of contractual leave during long-term sickness should be handled through a lawful consultation and variation process. Employers should also consider how any longstanding discretionary practices around contractual leave during sickness may have become implied terms, and should obtain advice before making significant changes that could impact employees already on long-term sick leave.
4. Impact of SSP and Company Sick Pay on accrual
Holiday accrual does not depend on whether an employee receives SSP or enhanced company sick pay. An employee continues to build up statutory leave regardless of pay status, as long as the employment relationship continues. This means that even employees on nil pay after the expiry of company sick pay or SSP still accrue statutory holiday entitlement.
For contractual leave, entitlement depends on the wording of the employment contract or policy. Some employers link accrual of enhanced contractual holiday to periods of active service, while others maintain full accrual regardless of sickness. Employers should ensure that payroll and HR systems reflect ongoing accrual of statutory leave and any agreed rules for contractual leave, even when pay reduces or stops, and that staff communications accurately reflect these arrangements.
Section A Summary
Employees on long-term sick leave continue to accrue statutory annual leave in full for the entire 5.6 weeks under the Working Time Regulations. The core four weeks of EU-derived leave attract stricter protections, including the requirement to pay holiday at normal remuneration, while the additional 1.6 weeks and any contractual leave can be treated more flexibly, subject to clear contractual wording and consistent practice. Employers must ensure their internal systems, policies and contracts accurately track and document holiday entitlement throughout the sickness period, and distinguish carefully between statutory and contractual elements to avoid disputes and ensure lawful management of employees’ rights.
Section B: Taking Holiday While on Long-Term Sick Leave
Employees on long-term sickness absence are legally entitled to take paid annual leave if they request it. HR professionals must balance this right with operational needs while ensuring decisions are consistent, lawful and well documented. Understanding when employers can refuse or require annual leave helps prevent disputes and ensures Working Time Regulations compliance. Employers should also remain alert to Equality Act considerations, as many long-term health conditions may qualify as disabilities requiring reasonable adjustments in how holiday is managed.
1. Employee right to request annual leave during sickness
Employees can choose to take holiday while they remain signed off sick. This applies even if they are receiving SSP, company sick pay or no sick pay at all. Holiday taken during sickness must be paid at the employee’s normal holiday pay rate for the EU-derived four weeks, not their sick pay rate, and at least basic pay for the additional 1.6 weeks unless the contract provides for more. Employers cannot block requests arbitrarily, and any refusal must comply with regulation 15 of the Working Time Regulations, be proportionate and be objectively justified by operational need, applied in line with the organisation’s normal holiday requests procedures.
Where an employee’s condition amounts to a disability, employers should consider reasonable adjustments when handling holiday requests, including flexibility around timing or procedure. A blanket refusal or overly strict process may create discrimination risks.
2. Employer ability to refuse holiday requests
Employers retain the right to refuse annual leave requests if there is a valid organisational reason, provided the refusal is communicated clearly and in accordance with the Working Time Regulations notice rules. Employers cannot refuse leave solely because the employee is off sick. Blanket policies prohibiting holiday during sickness are unlawful and present significant risk, particularly where the employee is disabled under the Equality Act.
HR teams should document refusals and ensure consistent application. Decisions should be carefully justified, especially where employees have accrued substantial leave and are approaching carry-over deadlines or termination. Poorly reasoned refusals may create liability under both the Working Time Regulations and the Equality Act.
3. When employers can require annual leave to be taken
Employers may require employees to take annual leave during long-term sickness, but only if they provide the correct statutory notice. This is generally double the length of the leave to be taken (for example, 10 days’ notice for 5 days’ leave). However, compelling employees to take annual leave during sickness should be approached with caution. If an employee is so unwell that they cannot meaningfully benefit from rest, forcing holiday may raise risk under case law and the Equality Act, particularly where the underlying condition qualifies as a disability. This power should generally only be exercised where the employee is sufficiently well to benefit from rest and time away from work, and where the employer can demonstrate it has acted proportionately and fairly.
Employers should document their reasons for requiring annual leave and consider whether alternative approaches may be more appropriate. In cases involving disabled employees, reasonable adjustments may include postponing compulsory leave or agreeing a more flexible approach to its timing.
4. Interaction with phased return programmes
During a phased return, employees remain entitled to use holiday if agreed. Employers sometimes use annual leave to top up hours during a staged return, but this must always be voluntary. Employers cannot pressure or require an employee to use holiday to supplement reduced hours or earnings during a phased return, as this may undermine sick pay entitlements and present discrimination risk.
Any agreement to use annual leave during a phased return should be genuinely employee-led, properly recorded and paid at the appropriate holiday pay rate. Using holiday to support a phased return can be helpful where it meets the employee’s needs, but it must never be imposed or implied as a condition of returning to work. Employers should ensure phased return planning aligns with wider absence management processes, including how the organisation is managing sickness absence.
Section B Summary
Employees on long-term sick leave have the right to request annual leave and be paid normally for the EU-derived four weeks and at least basic pay for the additional 1.6 weeks. Employers can refuse requests for legitimate operational reasons and may require leave to be taken only with proper notice, but decisions must be made carefully to avoid discrimination risks. A cautious, well-documented and employee-centred approach is essential, particularly when dealing with disabled employees or employees undertaking phased return programmes.
Section C: Carrying Over Holiday After Long-Term Sickness
Carrying forward unused holiday after long-term sickness is one of the most common areas of confusion for employers. The Working Time Regulations, supported by key case law, provide specific protections for employees who are unable to take statutory leave because of sickness. HR teams must understand which elements of annual leave can be carried over, how long for and what limits apply to contractual leave. Equality Act considerations also play a role, as disabled employees may require adjustments to how carry-over rules are applied.
1. 18-month carry-over rule from end of leave year
Employees who are unable to take their four weeks of EU-derived statutory leave because of sickness can carry it forward for up to 18 months from the end of the holiday year in which it accrued. This protection operates even where the employee could technically have taken leave but was genuinely off sick and not in a position to benefit from it. The additional 1.6 weeks of UK statutory leave does not carry over automatically unless the contract, policy or established custom and practice provides for it.
Employers should track leave year by year to avoid disputes as the 18-month deadline approaches. Once the 18-month period expires, the carried-over EU-derived leave lapses and does not need to be paid on termination, provided the employer has not prevented, discouraged or failed to facilitate the taking of leave in line with the principles confirmed in King v Sash Window Workshop.
2. Case law: HMRC v Stringer, Plumb v Duncan Print Group, King v Sash Window Workshop
Case law underpins the carry-over rights of employees on long-term sick leave:
- Stringer v HMRC confirmed that workers continue to accrue paid holiday while off sick and can claim unpaid holiday pay as an unlawful deduction.
- Plumb v Duncan Print Group clarified that employees on long-term sickness cannot be forced to prove they were physically unable to take leave and that carry-over of the core four weeks is capped at 18 months.
- King v Sash Window Workshop established that where a worker is denied the opportunity to take holiday, EU-derived leave may roll forward indefinitely. Although not a sickness case, it reinforces how employers must avoid obstructing employees from taking or requesting annual leave.
These decisions remain central for UK employers managing long-term sickness and assessing carry-over rights, particularly where historic absence patterns or poor recordkeeping have allowed entitlement to build up over several leave years.
3. Limits on contractual leave carry-over
Employers can set limits on the carry-over of contractual holiday beyond the 5.6 weeks statutory entitlement. If the contract is silent, the starting position is that the additional 1.6 weeks cannot be carried over automatically because of sickness. However, employers may choose to allow such carry-over through policy wording or consistent practice. A longstanding discretionary practice may become an implied contractual term, so employers must maintain consistency or make changes carefully and lawfully.
Employers should clearly communicate any carry-over limits and ensure they are applied consistently. Failure to do so may lead to allegations of unfairness or disability discrimination where inconsistent treatment disadvantages an employee with a long-term sickness condition.
4. Treatment of unused leave if an employee returns mid-year
When an employee returns after a long period of sickness, they may have accrued a significant amount of annual leave, including carried-over statutory leave from previous years. Employers are entitled to manage how and when this leave is taken, provided the Working Time Regulations notice rules are followed. However, requiring employees to take large blocks of leave immediately or at specific times can create risk if the employee’s health or disability makes this unreasonable.
A planned, documented approach supports compliance and helps ensure employees benefit from the rest and recovery intended by the legislation. Where an employee is disabled, adjustments may include spreading leave more evenly, allowing a delayed start to leave taking or permitting phased use of carried-over entitlement.
Section C Summary
Employees unable to take statutory leave because of long-term sickness can carry over up to four weeks of EU-derived leave for 18 months after the end of the relevant leave year. The additional 1.6 weeks and any contractual leave depend on the terms of employment and any established practice. Employers must track leave accurately, understand the impact of case law, and consider reasonable adjustments for disabled employees to ensure fair and lawful management of carry-over.
Section D: Holiday Pay on Termination After Long-Term Sickness
When employment ends following a period of long-term sickness, employers must account for any accrued but untaken statutory holiday. This applies whether the employee resigns, is dismissed on capability grounds or leaves through redundancy or agreement. HR professionals must ensure calculations are accurate and compliant, particularly where the employee has not worked for many months, as holiday pay errors frequently lead to unlawful deduction claims. Employers should also understand how the 18-month carry-over rule interacts with termination, as expired carried-over leave does not need to be paid.
1. Unused statutory leave entitlement must be paid
On termination, employees are entitled to payment in lieu of any statutory annual leave they have accrued but not taken. This includes leave carried over from previous holiday years due to sickness, provided it falls within the 18-month carry-over period. Employers cannot exclude this payment on the basis that the employee has been off sick or that they have not taken holiday before leaving.
Once the 18-month limit has expired, any unused carried-over EU-derived leave lapses and no payment is required, provided the employer has not prevented, discouraged or failed to facilitate the taking of leave in line with the principles established in King v Sash Window Workshop.
2. How to calculate holiday pay when no recent work has been done
Where the employee has not performed work for an extended period, calculating holiday pay requires a representative reference period. For the four weeks of EU-derived leave, holiday pay must reflect the employee’s normal remuneration intrinsically linked to the performance of the role, which may include regular overtime, commission or allowances.
Employers must use the 52-week reference period under the Employment Rights Act 1996, excluding any weeks in which the worker received no pay. Where fewer than 52 paid weeks are available, employers must look back up to 104 weeks to identify sufficient paid weeks. Accurate payroll records are essential where employees have been on extended nil pay.
3. What happens to enhanced (contractual) holiday
Payment for enhanced or discretionary contractual holiday depends entirely on the employment contract or policy. Some employers allow payment in lieu of contractual holiday on termination, while others restrict carry-over or allow unused contractual leave to lapse at the end of each holiday year.
Employers must be careful to distinguish between statutory and contractual holiday when calculating final pay, as statutory leave must always be paid for if accrued, regardless of policy wording. Where contractual terms are ambiguous or historic custom and practice has created implied rights, employers should seek clarity before processing termination payments to avoid disputes.
4. Settlements, redundancy and long-term sickness
Where employment ends through redundancy or a settlement agreement, accrued but unused statutory holiday must still be paid unless the employee has taken it during their notice period. Employers should ensure that redundancy calculations, including notice pay and PILON clauses, are aligned with holiday pay obligations to avoid disputes after termination.
Particular care is needed where the employee is disabled. Failure to follow consistent and non-discriminatory holiday treatment during sickness, notice or redundancy may give rise to discrimination claims alongside holiday pay disputes. Employers should also ensure capability dismissals following long-term sickness are handled lawfully and consistently with wider capability dismissal principles.
Section D Summary
When employment ends after long-term sickness, employers must pay employees for all accrued statutory holiday, including any carried-over EU-derived leave that remains within the 18-month window. Calculations must follow a legally compliant reference period, excluding zero-pay weeks and using extended reference periods where necessary. Contractual leave is governed by policy terms, and employers should ensure all final payments are accurate, properly documented and consistent with equality and Working Time Regulations obligations.
FAQs
Does holiday continue to build up during long-term sick leave?
Yes. Employees continue to accrue statutory annual leave during long-term sickness, even when receiving SSP, company sick pay or no pay at all. This applies for the full 5.6 weeks under the Working Time Regulations. Accrual of any additional contractual holiday depends on the wording of the employment contract, policy or any established custom and practice.
Can employers force employees to take holiday during sickness?
Employers can require employees to take holiday by giving the correct statutory notice under the Working Time Regulations. However, this must be approached with caution. If the employee is genuinely too unwell to benefit from rest, compelling holiday may breach the Working Time Regulations or give rise to Equality Act risks, particularly where the employee is disabled.
Can employees be paid for unused holiday instead of taking it?
Not during employment. Payment in lieu of statutory holiday is only permitted on termination of employment. During employment, statutory holiday must be taken as time off and cannot be replaced with pay, even where the employee is on long-term sick leave.
Does long-term sick leave reduce the 5.6 weeks statutory entitlement?
No. Statutory holiday entitlement continues to accrue in full during long-term sickness absence. This includes both the core four weeks of EU-derived leave and the additional 1.6 weeks of UK domestic leave.
How far back can holiday be carried forward after long-term sickness?
Employees who are unable to take holiday because of sickness can carry over up to four weeks of EU-derived leave for up to 18 months after the end of the leave year in which it accrued. The additional 1.6 weeks can only be carried over if this is allowed by the employment contract, policy or established practice.
What happens if an employee refuses to take holiday during sickness?
If the employer has given valid statutory notice requiring leave to be taken, refusal may amount to a breach of the Working Time Regulations. However, employers should always consider the employee’s health, the reasonableness of the requirement and any disability-related adjustments before enforcing compulsory leave.
Conclusion
Holiday rights during long-term sickness absence sit at the intersection of employment law, the Working Time Regulations and established case law. Employers must apply these rules consistently and carefully to avoid unlawful deduction claims, breach of contract disputes and discrimination risks under the Equality Act.
Statutory annual leave continues to accrue throughout periods of sickness, regardless of whether the employee is receiving SSP, company sick pay or no pay at all. Employees retain the right to request paid annual leave while off sick, and employers must ensure that any refusal or requirement to take leave complies with Working Time Regulations notice rules and is objectively justified. Where long-term sickness amounts to a disability, reasonable adjustments must be considered at every stage.
Carry-over rules can result in significant accrued entitlement across multiple leave years, particularly where sickness prevents leave being taken. Employers must track entitlement accurately, understand the 18-month limit on EU-derived leave, and ensure they do not obstruct employees from taking or requesting holiday. On termination, accrued statutory holiday must be paid using a legally compliant reference period, even where the employee has not worked for many months.
A structured, well-documented approach to managing holiday during long-term sickness supports compliance, reduces disputes and promotes fair treatment. Clear internal policies, accurate recordkeeping and informed HR decision-making are essential to managing risk while supporting employees through extended periods of ill health.
Glossary
| Statutory annual leave | The minimum 5.6 weeks of paid annual leave that employees are entitled to under the Working Time Regulations. |
| Contractual annual leave | Any annual leave entitlement provided by an employer in excess of the statutory minimum, governed by the employment contract or policy. |
| EU-derived leave | The core four weeks of statutory annual leave originating from EU law, which carry enhanced protections relating to sickness absence, carry-over and holiday pay. |
| UK domestic leave | The additional 1.6 weeks of statutory annual leave provided under UK law, which is subject to greater flexibility in treatment than EU-derived leave. |
| Long-term sickness absence | Prolonged sickness absence, commonly defined by employers as four weeks or more, during which the employment relationship continues. |
| Carry-over | The ability to transfer unused holiday entitlement from one leave year into a subsequent leave year under specific legal or contractual rules. |
| Statutory Sick Pay (SSP) | The minimum level of sick pay that eligible employees are entitled to receive from their employer during periods of sickness, subject to statutory conditions. |
| Company Sick Pay (CSP) | Enhanced sick pay provided by an employer under contractual terms or workplace policy, above the statutory minimum. |
| Normal remuneration | The level of pay that holiday pay must reflect for EU-derived leave, covering earnings intrinsically linked to the performance of the role, such as regular overtime, commission and allowances. |
| Reference period | The statutory period used to calculate average weekly pay for holiday pay purposes, normally 52 paid weeks, excluding weeks with no pay and extending up to 104 weeks where necessary. |
| Working Time Regulations (WTR) | The UK legislation governing working hours, rest breaks and statutory holiday entitlement. |
Useful Links
| UK employment law guidance | https://www.davidsonmorris.com/employment-law/ |
| Holiday pay guidance | https://www.davidsonmorris.com/holiday-pay/ |
| Managing sickness absence | https://www.davidsonmorris.com/managing-sickness-absence/ |
| GOV.UK – Holiday entitlement | https://www.gov.uk/holiday-entitlement-rights |
| GOV.UK – Statutory Sick Pay (SSP) | https://www.gov.uk/statutory-sick-pay |
| ACAS – Sickness and holiday | https://www.acas.org.uk/time-off-holidays-and-sickness |
| Working Time Regulations 1998 | https://www.legislation.gov.uk/uksi/1998/1833/contents |
| ACAS – Managing long-term sickness absence | https://www.acas.org.uk/managing-sickness-absence |
