I am a HR Manager and am unsure of what the law currently prescribes in relation to the carrying over of annual leave that remains untaken at the end of the year due to sickness or maternity leave. Our current company policy dictates that a maximum of 5 days leave can be carried over and any additional days that remain untaken will be lost. Is this in line with the current legislation or are workers entitled to carry over an unlimited number of days into subsequent leave years?
European legislation provides that every worker is entitled to paid annual leave of at least four weeks. The Working Time Regulations 1998 (“WTR”) have extended this to 5.6 weeks for workers in Great Britain. The WTR also state that the first four weeks’ statutory leave can only be taken in the leave year in respect of which they accrue, which means that they cannot be carried over into the next leave year.
Annual leave and sickness
However, the European Court of Justice has interpreted the WTR broadly to give workers wider rights with regards to when the 4 weeks of annual leave prescribed by European legislation can be taken. Accordingly, employers should be aware of the points below arising from the decisions of the courts and should consider whether their handbooks, policies and practices should be revised to reflect these decisions:
- A worker on sick leave continues to accrue annual leave rights. Therefore, if a worker is prevented from taking their leave due to sickness, they must be allowed to take it following their return to work, even if this means carrying it over to the next leave year.
- Workers on long-term sick leave can, if they wish, take annual leave whilst on sick leave. They are also entitled to be paid in respect of any untaken annual leave in the event that their employment is terminated.
- If a worker becomes sick BEFORE planned leave or even DURING planned leave, they have a right to postpone their period of annual leave and take it at later date even if it means carrying it over to the next leave year. If a worker becomes sick during annual leave, this right can be made subject to providing medical evidence.
- There is no obligation on a worker to notify their employer of their intention to carry over annual leave in circumstances where the workers’ sickness has prevented them from taking it.
Limits on carry over in relation to sickness
Employers will be concerned about the fact that carry-over of annual leave due to sickness may result in the employer being required to pay a large sum of money in lieu of leave on termination of the employment or be left to face a lengthy period without the worker being at work.
Don’t panic! The European Court of Justice has held that an employer can reserve the right to impose a time limit on carry-over, after which statutory annual leave days will be lost. As a guideline the carry-over period should be "substantially longer” than the period in respect of which it is granted. This means that if leave is calculated on a yearly basis, the carry-over period must be substantially longer than one year. European case law suggests that 15 months from the end of the relevant leave year is an acceptable cut-off point but that 9 months is too short a period.
Annual leave and maternity leave
A woman's contractual right to annual leave continues during ordinary and additional maternity leave. Accordingly, women on maternity leave continue to accrue their full contractual entitlement to annual leave, including their statutory paid annual leave entitlement of 5.6 weeks under the WTR. It is not possible to take annual leave and maternity leave at the same time, therefore if a worker gives birth whilst on annual leave, before her maternity leave officially begins, her annual leave will stop and her maternity leave will start.
European case law states that it would amount to sex discrimination if a woman were to lose her entitlement to statutory annual leave as a result of going on maternity leave. Therefore, employers must allow workers to either take all their annual leave before going on maternity leave, or, allow the worker to carry it over into the next leave year.
In practice employers often come to amicable agreements with their workers with regards to annual leave. As a result, annual leave is often either taken at the beginning or the end of maternity leave.
The same principles apply to adoption leave and paternity leave.
Proposed legislative changes
In order to bring UK legislation in line with the European case law outlined above, the government proposes to:
- Amend the WTR to expressly state that where a worker has been unable to take their annual leave due to sickness absence (or falls sick during scheduled annual leave), and it is not possible to reschedule the leave in the current leave year, they will be able to carry it over into the following leave year. However, this proposal is limited only to the four weeks of annual leave provided by the European legislation, and as such the employer will not be required to carry-over any days over and above the 4 weeks that remain untaken in a leave year.
- Allow employers to request that workers take unused leave in a current leave year if there is an opportunity for them to do so or where there is a business need, to insist that the unused leave is carried forward to the following leave year.
- Allow employers to “buy out” the 1.6 weeks of annual leave which is above the European entitlement of 4 weeks. Such a “buy out” would require agreement between the parties.