Holiday pay on termination of employment and sickness

When employment is terminated, the employee will be entitled to pay in lieu of any holiday accrued in the current holiday year but not taken.

If an employee is off sick and has holiday accrued and untaken from the previous holiday year, this may also need to be paid (see Holiday carry over).

If an employee has accrued holiday during Ordinary Maternity Leave (OML), Additional Maternity Leave (AML), Ordinary Paternity Leave (OPL), Additional Paternity Leave (APL), Adoption Leave (AL) Shared Parental Leave (SPL) which has not been taken before termination of employment, even if this relates to a previous holiday year, the employee is entitled to be paid in lieu of this holiday.

If holidays taken are in excess of an employee's entitlement, the employer may be able to deduct the excess pay from the employee's final salary payment or from money owed to the organisation if the organisation has contractually reserved the right to do so. This may also apply to any time in lieu owing to the organisation.

The Working Time Regulations 1998 prohibit payment in lieu of holiday entitlement except where employees are owed holidays on the termination of their employment (see Rolled up holiday pay for more information).

Impact of sickness on holiday pay:

If an employee falls sick during their annual holiday or on a public holiday, the holiday pay may include any entitlement to Statutory Sickness Pay (SSP) and/or company sick pay.

Holiday during a notice period prior to termination of employment

An employer may require an employee to take (or not take) any outstanding accrued holiday entitlement during a notice period prior to termination of employment, whether this is worked or spent on garden leave. It is preferable to have a clause in the contract of employment stating that an employer may require this, but if there is no such clause then an employer needs to give the employee the relevant notice for taking holiday (see Holiday requests and booking procedures).