By Daniel Hunter

Small businesses should brace themselves for employees making requests to claim back annual leave when they have become ill while on holiday, the employment specialist and health and safety advisor Bibby Consulting & Support has warned.

Managing Director Michael Slade said companies will be frustrated and disappointed that more rights are being given to employees at a time when the government has pledged to reduce red tape and help firms take on new recruits and to grow.

Following a decision by the European Court of Justice, under a new directive which comes into effect this October, any employee who takes annual leave but during that time falls ill will be able to take the days they have off sick as extra holiday entitlement later in the year.

As long as the employee can produce a valid sick note, businesses will be obliged to give them the extra time off. The same ruling will also apply to staff who become ill while on maternity or paternity leave. Estimates are that the changes will cost businesses over £100m a year.

"This news is very disappointing for businesses, especially small and medium enterprises (SMEs)," Slade said.

"What it means is that employees who are absent from work due to sickness will continue to accrue holiday entitlement during this period. And where they are prevented from taking their full annual leave entitlement during any holiday year because of sickness, they will be entitled to have it carried forward to the following year, regardless of what the company policy is.

"Employers might not want to allow a worker who is off sick to take a holiday, because the employee is off to recover from an illness. Our advice would be to allow holiday entitlement to continue to accrue while the employee is off sick and then let it be taken as paid time off when the employee is fit to return to work. Should the employee cease to work for the business in that period, the time off could be replaced with a payment in lieu."

However, Slade pointed out that in many cases employees are only entitled to receive statutory sick pay when they are off ill, which is significantly less than the normal pay they would receive if they were on holiday. Also, the employer can dictate when the employee takes annual leave to some extent, depending on their business needs.

"It remains to be seen how much impact these changes will have on the number of employees claiming sickness during their holidays," Slade said, "but SMEs will see this change as yet another burden that they can well do without, and one which appears to fly in the face of the government’s pledge to help business leaders — in fact it does quite the opposite."

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