UK: Holidays And Sickness Absence

Last Updated: 27 January 2009
Article by Val Dougan and Robert Davies

In a decision which will prove costly for employers, the ECJ has finally issued its judgement in Stringer v HMRC regarding the accrual and payment of holidays during long term sickness absence.

The ECJ has decided that employees do accrue holidays during long-term sickness absence but there is no right to take the holidays until they come back to work, even where the absence covers a different holiday leave year. Similarly, upon termination of employment, employers should make a payment in lieu of leave accrued during the sickness absence. The employee does not have to work during the holiday year to be entitled to the leave. Therefore, if an employee has not been able to take holidays because of illness, they cannot be deprived of exercising their right to take their holidays, such right is not extinguished at the end of the leave year but should be carried over.

The long running saga is not over yet, since the case must return to the House of Lords in order to apply the ECJ ruling and reconcile the prohibition in the Working Time Regulations (WTR) on carrying over leave with the European Directive. The ECJ also said it is up to the national court to decide whether leave should be taken during the sickness period or after.


The ECJ considered questions relating to the European Working Time Directive in relation to two separate cases – Stringer v HMRC and Schultz-Hoff v DRB. The cases were considered together by the ECJ because they concerned similar issues.

Stringer concerned several current and former employees of HMRC. One of the employees was on indefinite sick leave. She asked HMRC to take several days paid annual leave during her sick leave. HMRC refused. The other employees in this case had been on long-term sick leave and had been unable to take their annual leave during the leave year. These employees sought payment in lieu of the unused annual leave.

Schultz-Hoff v DRB is a German case. Mr Schultz-Hoff was on sick leave from September 2004 until September 2005 when he was found to be incapable for work and granted a permanent pension. In May 2005 Mr Shultz-Hoff requested paid annual leave in relation to his entitlement for the 2004 leave year. DRB refused on the basis that annual leave could only be taken if an employee was fit for work and that Mr Schultz-Hoff was not.

Under German law an employee is entitled to payment in lieu of annual leave if they have been unable to take the leave because they were on sick leave. The employee loses this right if they are incapacitated during the entire leave year or at the end of any carry-over period (which cannot exceed three months). Therefore Mr Schultz-Hoff also lost the right to be paid in lieu of his annual leave for the 2004 leave year.

The House of Lords in the Stringer case and the German Higher Labour Court in the Schultz-Hoff case asked the ECJ for guidance on the interpretation of the Working Time Directive.

The ECJ found that it is acceptable for national legislation to prevent an employee from taking paid annual leave during periods of sick leave. The ECJ also found that if an employee has been on sick leave for the whole or part of the leave year and has therefore been unable to take his annual leave, the employee does not lose his entitlement to annual leave and can take the annual leave when he returns to work. In addition, where an employee has been on sick leave prior to his employment being terminated and has therefore been unable to take his annual leave, he is entitled to a payment in lieu of that annual leave even where he has been absent for the entire leave year.

The cases now go back to the national courts. The House of Lords will have to apply the ECJ's judgement to UK law and issue a final decision in the Stringer case and may involve an amendment to the WTR.

What Does This Mean For Employers?

Immediate Impact:

  • Employers can continue to stipulate in their contracts of employment and sickness policies that contractual leave which exceeds the statutory minimum does not accrue during sickness absence. The ECJ's decision only applies to the basic statutory entitlement under European law which is 20 days annual leave rather than the current 24 in the UK.
  • Employers should give credit for holidays which accrue during sickness absence. Similarly upon termination of employment, employees should be paid for holidays which are accrued during absence.
  • For the public sector this also means that carry over of leave can no longer be prohibited and credit should be given for this in either an accrual of leave or payment upon termination. Human Resource teams will need to communicate this to the business line and payroll colleagues in order to act on it accordingly. However, public sector employers may prefer not to amend their written sickness absence and sick pay policies until the House of Lords has ruled, in order to minimise the administrative aspects for wider communication.
  • It is not entirely clear how the ruling which prohibits the carry over of leave where an employee has been unable to take it will impact on private sector employers. Whilst public sector employees can rely directly on the Directive to enforce their rights, the same is not true of the private sector. For the private sector, a prudent approach to the carry over issue may be to advise employees that you are awaiting clarification from the House of Lords before dealing with leave accrued in a previous leave year.
  • The costs involved in dismissing an employee who has been absent on sick leave for a long period will increase significantly as a result of this decision. Employers should therefore audit long term sickness absence cases to ensure that they have budgeted for holiday pay liabilities. Employers will have limited opportunity to expedite a capability dismissal where an employee is suffering from a disability, since it's highly unlikely that a tribunal would be sympathetic to a failure to make a reasonable adjustment based on the accrual of outstanding holiday pay. In fact the increased costs of dismissal may incentivise employers further to explore reasonable adjustments to facilitate a return to work more quickly.
  • Employers should review their PHI policies now to check whether accrued leave is covered and payable under their terms, both in relation to employees returning to the workforce and those who may be dismissed where an insurer is seeking to commute a claim, in preparation for the House of Lords decision.

Once The House Of Lords Issue Their Decision:

  • Sickness absence policies will need to be reviewed in anticipation of likely amendment in relation to carry over arrangements. The better time to amend policies is when the full domestic picture is available.
  • It is implicit within the ECJ's reasoning that leave may be carried over several leave years. If an employee has been absent over several leave years then they will expect to be able to take such leave upon return or be paid in lieu for the holidays accrued over that absence if they are dismissed. This is obviously particularly difficult for employers who either have employees on permanent health insurance policies (PHI) which enable an employee to be absent for several years, or for employers who fail to deal with an absence – the common scenario that someone has exhausted their sick pay but is still "on the books". As noted above, the terms of PHI policies should be checked to determine if they cover accrued holiday pay such that the cost can be met by the insurer not the employer.

Val Dougan
Dundas & Wilson LLP

Robert Davies
Dundas & Wilson LLP

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.