Holiday Pay Revisited

A recent EAT decision has looked at the tricky area of a workers’ entitlement to holiday pay and the ability to carry over holiday from one year to the next. The case considered whether a worker who neither took, nor tried to take, holiday entitlement during a number of years’ absence was entitled to statutory holiday pay. The EAT concluded he was not.

The consequences of this EAT decision are as follows: 

• a worker has to give notice to their employer that they want to take holiday - otherwise they don’t get holiday or, it follows, holiday pay;
• workers that do not use their holiday entitlement (and have not requested to take it) during a leave year will lose their entitlement at the end of that year;
• the position regarding workers on long term sick leave is slightly different, however. Workers can choose to take their holiday entitlement (and be paid for it) or request that the holiday entitlement be deferred to a later period. If no holiday is requested, it will lapse at the end of the leave year.

The decision applies only to statutory holiday (granted under the Working Time Regulations) although by extension, it is likely to apply to any additional contractual holiday (unless there are provisions to the contrary within the employee's terms and conditions). As part of their decision, the EAT also confirmed that there is no obligation on an employer to inform a worker of their right to request holiday.

Whilst this decision does help employers in many ways, it raises other questions - what is long-term sick leave, for example? This EAT decision also directly conflicts with another recent EAT decision, which is currently being appealed. We will provide a further update once the Court of Appeal rules in this area - currently anticipated to be at the beginning of 2012.

Furthermore, a related ECJ case has determined that there can be a limit to the length of time an employee on long-term sick leave can carry over untaken holiday. In this particular case, a 15 month limit specified in a collective agreement was considered reasonable and enforceable. Employers should consider, therefore, imposing time limits for employees on long-term sick leave to take holiday. This could help avoid (expensive) claims for holiday pay after several years of absence. Note that it is not yet clear, however, whether periods shorter than 15 months would be permissible.