Legal insight: Hidden cost of sick leave

Written by
Changeboard Team

Published
15 Nov 2012

15 Nov 2012 • by Changeboard Team

Holiday leave

This is because European law enables UK employees to save up the holiday leave entitlement accruing to them while on sick leave and take it when they are well enough to return to work.  

They can also request to carry a “reasonable” amount of holiday leave over to the following holiday year which, following various European cases, is thought to be about three months. 

If the staff member’s employment terminates during the period of sick leave, they will also be entitled to payment in lieu of holiday.

This means that, if they been on sick leave for a year and have a holiday allowance of six weeks per year, when they return to work the following year, they may be entitled to 12 weeks holiday leave.

One of the major causes of sick leave is stress. Stress triggers are on the rise, and simply reading the news can be stressful for some during times of waning confidence in job security. Money troubles can also place domestic relationships under pressure. 

But anxiety and tension make it more difficult for people to concentrate and cope with the normal demands of the workplace. 

Once an individual is diagnosed with depression, however, employers are legally obliged under both employment and health and safety law to take steps to reduce their normal work pressures and offer support. 

Employers carry a financial and moral burden. If full pay is continued for a period after an employee goes on sick leave, it is often a difficult decision to curtail that arrangement, particularly if they are known to be depressed or anxious about money. 

Another potential cost involves hiring temps to cover the person on sick leave. If the funds are simply not available, it is common to ask work colleagues to take on the additional burden of covering for their fellow worker, but this can, in turn, cause them to become stressed or unhappy about their own workload.

Occupational health specialists

But there is also the issue of trust to be considered. Employees on long-term sick leave may neglect to apply for holiday leave if taking it while off due to illness, perhaps taking the view that a trip abroad will act as a therapy and not really amount to a vacation at all. 

If it comes to the attention of their employer that they have gone to Spain for a fortnight and not applied for holiday leave, however, the situation can affect the relationship of trust between them. 

It could also result in the employer having to take on the administrative burden of an investigation if the employee concerned disputes that their trip amounted to holiday. 

Moreover, if an individual’s illness qualifies as a “disability” under the Equality Act 2010, employers are normally obliged to seek a medical opinion in order to identify what reasonable adjustments they should consider making to support the person concerned in continuing or returning to work. 

For many employers, this will mean referring their staff member to an independent occupational health specialist at a cost of around £500. But such a situation can prove problematic as specialists often only meet up with employees and not employers. 

This means that it is not uncommon for them to hear, and be persuaded by, the staff member’s view of their health and ability to work, without properly understanding the employer's standpoint. 

As a result, employers should give priority to communicating with such specialists before the patient’s review in order to ensure that they clearly understand the requirements of the employee's role, the nature of their work environment and the constraints upon the employer to modify these factors.

For example, a sales executive could be on sick leave for depression that has been exacerbated by stress, but their employer has to increase their sales targets by 15% or the business will go under.

In this instance, it simply may not be feasible to hold the employee's job open or to enable them to return with reduced targets or hours. But if the specialist is unaware of the business’ financial pressures, they could advise that the sales executive’s targets be cut in order to reduce their stress levels. 

Clear communication

On receiving the specialist’s advice, the employer would be on the back foot and have to explain why they needed to reject the advice on business grounds. Such a scenario could lead to an unpleasant and unhelpful dispute between the specialist and the employer which, in turn, could undermine the relationship of trust with the employee. 

Therefore, the current economic environment means that employers must ensure that their contractual terms and employment policies are as recession-proof as possible. 

In other words, policies that may have been sustainable in boom times could simply be impracticable now. For instance: 

  • If you have traditionally paid over and above the amount provided in statutory sick leave, can you still afford to do so and, if you can’t, have you retained the ability to stop such payments?  
  • Does the sick pay policy set out how discretion is exercised and, once exercised, the circumstances in which that discretion will be reviewed and stopped, and under what notice terms for employees?
  • Do you restrict the ability to carry over holiday from one year to another and, for people on sick leave, is that carry-over period restricted to the minimum holiday allowance permitted under statute, or do they have an enhanced holiday allowance written into their contract?
  • If you operate a bonus scheme, is the entitlement to that bonus moderated if staff members are on sick leave for a lengthy period of time?
  • Do you undertake home visits as a means of both monitoring the progress of a sick employee and signaling to them that they are valued in order to maintain a relationship of trust. This approach is important as trust is conducive to honest discussions about the staff member’s recovery and the likelihood of them returning to work within a reasonable period of time, while also taking into account the needs of the business.  

But employers should also take the time to consult regularly with staff members who are covering for sick colleagues in order to ensure that they are not over-burdened.  

The UK government is currently reviewing a conflict between the Working Time Directive and the UK’s Working Time Regulations and has expressed concern over the way in which the European Court of Justice has interpreted the holiday entitlement of those on sick leave. 

But most employers will undoubtedly be keen to avoid legal disputes with staff over the interpretation of a conflict between UK and European law. 

Therefore, a more pragmatic approach would seem to be to communicate clearly with employees about the economic pressures that they are experiencing and what they can and cannot afford to do if a staff member goes on sick leave. 

They should also maintain a regular and candid dialogue with the staff member concerned during their period of absence. 

But such activity should be undertaken while ensuring that employment contracts and policies conform to European law, enabling employers to take decisions that are both fair to individuals and that support the stability of the business.