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Cutting Through Complexity

Going on Holiday?

19th September 2013

Your full-time employee has four years’ service, has been on long-term sick leave for nine months, has run out of sick pay and has decided to resign to take up a less stressful role elsewhere. It’s been a difficult time for the employee over the last few months, he’s had personal relationship problems and his pet cat has had a nasty case of mange. It’s been a difficult time for you too as you couldn’t recruit to replace the employee whilst there was a chance he might return. But now he’s gone and you need to ensure he receives the correct final payments.

He says that as you would have had to have given him one month’s notice under his contract of employment if you had dismissed him, he’s entitled to one week’s full pay for his notice period. Rather bizarrely, he’s right as an employee will always be entitled to one week’s full pay if the employer’s contractual notice period is less than one week more that his statutory notice entitlement – here, four weeks after four years’ service compared to a month in his contract. There is no rhyme or reason to this law!

He also wants to receive pay in lieu of the holiday which has accrued during the last nine months while he’s been off sick. This stretched over two leave years and he’d already taken 15 days of his 20 days plus 8 bank holidays entitlement in the previous year. Your contract doesn’t allow for any carry-over from one year to the next, but your employee argues that that’s rubbish.

He’s right again – in part. Over the last few years, it’s been established that not only does a worker accrue paid holiday entitlement under the EU Working Time Directive during sick leave, but he must also be allowed to carry it over to the next leave year where, due to his being sick, he has been unable to take holiday in the year in which it accrued. However, recent case law has held that carry-over may be limited to the minimum four weeks’ holiday entitlement (20 days full-time equivalent) under the EU Working Time Directive.

This means that our employee is entitled to receive a payment in lieu of 5 days for the previous leave year, together with a pro-rata entitlement for his final leave year. For instance, this would be 7 days (25% of 28 days) if he left three months into the final leave year.

The contents of this update are intended as guidance for readers. It can be no substitute for specific advice. Consequently we cannot accept responsibility for this information, errors or matters affected by subsequent changes in the law, or the content of any website referred to in this update. © Mundays LLP 2013.

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