Managing sickness and annual leave – use it or lose it?

In summary, the European cases said that you must allow the employee to take the holiday on another date, even if that means carrying it over to the next holiday year. In the German case of KHS AG v Schulte (2012), the European Court of Justice said that Mr Schulte was limited to carrying forward holiday for 15 months from the end of the leave year, as stated in his contract.

But what does this mean for employers in the UK when the contract is often silent?

Is the right to carry forward holiday unlimited? No, said the Employment Appeal Tribunal (“EAT”) this month in the UK case of Plumb v Duncan Print Group Limited.

Mr Plumb was off sick for 4 years. At the end of his employment he wanted payment for accrued holiday for three previous holiday years. The EAT said that an employee on long-term sick leave cannot carry holiday forward indefinitely from one holiday year to the next. The period is limited to a maximum of 18 months from the end of the holiday year if the contract is silent. The EAT went on to say that a shorter period, like that of 15 months in Mr Schulte’s contract, may also be appropriate in some circumstances, if provided for in the contract.

The decision in Plumb means that on termination of employment, the employee’s entitlement to payment in lieu of untaken holiday will be limited to 18 months. However, it may be possible to provide a shorter period in the contract.

The first 20 days of leave

You should bear in mind that the right to carry holiday forward in cases of sickness absence relates only to the first 20 days of leave (which is the holiday provided by EU law). It does not apply to the additional 1.6 weeks provided by the Working Time Regulations in the UK or to any extra contractual holiday. If you choose to set a period for carry over of holiday in your contact then you should make sure it is clear that this only applies to the first 20 days. Otherwise, you could potentially give employees the right to carry forward additional or contractual leave too.