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Holiday bonus for sick workers

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The European Court of Justice (ECJ) has delivered a judgment which means that when an employee is absent on sick leave, he or she will still accrue entitlement to paid holiday. The long-awaited ruling seems to suggest that employees in the UK will be able to take their paid leave whilst on sick leave, or, if he or she is unable to do so, carry it forward until the following holiday year. The ECJ also gives workers who have been on sick leave for all or part of the leave year, the right to a payment in lieu of their untaken leave on termination of employment. The decision is likely to come as a blow to employers, who are faced with yet more costs in a difficult economic climate.

The case was brought by several employees at HM Revenue and Customs in the UK and a worker from Deutsche Rentenversicherung Bund, a pensions and insurance organisation in Germany. The workers had been successful in their claims before the Employment Tribunal, however the employers appealed until proceedings reached the House of Lords. The House of Lords decided to stay the proceedings and refer to the ECJ for a ruling on its interpretation of the Working Time Directive (WTR), a piece of European legislation. The WTR provides that "the Member States shall take the measures necessary to ensure that every worker is entitled to paid annual leave of at least four weeks". It was not clear, however, what effect long term sick leave had on this entitlement and the recent ruling clears up years of dispute over the issue.

The ECJ decision is likely to be unpopular with employers. Employees who are absent for all or part of a leave year may accrue several weeks of holiday, which means it will be more difficult to integrate them back into the workplace once they are back to full health.  Employers wishing to terminate the employment of a worker who has been on long sick leave, may now have to make a payment to them for a backlog of holiday which has accrued during sick leave but not been taken. This represents further costs to employers at a time when many businesses are taking measures to trim the wage bill.

It is important that all employers robustly manage sickness absence. The best way of doing so is by implementing an Attendance Policy, which sets out the obligations of both the employer and employee when a worker is taken ill. This should include an obligation on employees to provide medical certificates for periods of absence and attend interviews with their Line Managers on their return to work. To lessen the impact of the ruling, employers may wish to reconsider whether they provide employees with Company sick pay (over and above Statutory Sick Pay), given there is no legal obligation on employers to do so. Likewise, employers should review their contracts of employment to ensure that they provide that contractual leave over and above the statutory minimum, does not accrue during sick leave.

If you would like more advice on managing sickness absence, please contact a member of the Clarion Employment team.

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