Holiday pay for long term sick creates headache for employers

Employers could face unexpected bills for holiday pay for staff on long term sick leave following a ruling from within the European Court of Justice.

The court’s advocate general says employees should be entitled to claim annual holidays while on sick leave and should receive pay in lieu of their entitlement if they are laid off by their employers.

It means employers could be pushed into making tough decisions about how to deal with staff on sick leave.

At the moment employees on sick leave don’t accrue holiday entitlement and once they move from statutory sick pay to state benefits there is no real cost to the employer. This means there is often no pressing need to terminate their employment.

That looks set to change and firms may have to lay people off much sooner. That is perhaps harsh on the employee but may be necessary to prevent firms incurring the high cost of providing holiday pay for people who are no longer contributing to the business.

The European Court of Justice won’t make a formal ruling on the issue until later in the year but it follows the opinion of the advocate general in the vast majority of cases.