Member Article

Holiday pay ruling a blow for small businesses

Leading Hampshire law firm Moore Blatch is warning that small businesses could be hit hardest by a recent Court of Appeal decision that has ruled employees should be paid for holiday accumulated while they are off sick.

The decision means employers may now face having to pay employees for holiday time they could not take while on long term sick leave, with employees able to claim back that holiday pay even if they have now left the company.

“For businesses, particularly small to medium sized firms, these additional costs could prove a fatal blow, as they may run into hundreds of pounds,” explains Katherine Maxwell, an employment law specialist for Moore Blatch.

She added: “Employers are now in an unusual position where they may also owe backdated annual leave pay to employees who have been on sick leave for a long period of time. In the current economic climate, this is likely to be a cost businesses can ill afford.”

The case in question is NHS Leeds vs Larner, where a woman was off sick for a year before being dismissed, and the court upheld the decision that she should be paid for the annual leave she had not been able to take during that year.

Employees now have the right to either be paid the leave or to have it carried over if they are off sick on a long term basis and do not have the opportunity to take their holiday time.

Katherine added: “It’s important for employers to bear in mind their obligation to pay accrued but untaken annual leave. This is one of the reasons why it’s so important to manage sickness absence, as well as regularly reviewing existing absence policies.”

According to the Centre for Economics and Business Research, large companies spend an average of £620,000 each year on sick pay, replacement staff salaries and recruitment costs for replacement workers.

For employers who are concerned and would like more information, visit www.mooreblatch.com

This was posted in Bdaily's Members' News section by Liz Pusey .