Under the Working Time Regulations 1998 (WTR) workers are entitled to take, and be paid for, a minimum amount of annual leave in each leave year. The WTR do not allow workers to carry forward leave and only allow payment in lieu of holiday entitlement on termination of employment. Following decisions of the European Court of Justice and the House of Lords in 2009, employers face uncertainty over the statutory holiday entitlement of employees on long-term sick leave. The European and UK decisions confirmed that holiday entitlement continues to accrue during sickness absence.

 More controversially, despite the wording in the WTR, those decisions also appeared to create the potential for workers to carry forward leave and to recover pay going back a number of years in respect of statutory holiday entitlement which they had been denied the opportunity to take because of illness. They could do this by claiming there had been a series of unlawful deductions from wages. However, a recent decision of the employment tribunal offers employers some reassurance.

In Khan v Martin McColl the employment tribunal found that the employee could not claim holiday pay for previous years where he had not requested it at the relevant time. If he had not requested it, he had not been denied it. Moreover, the tribunal considered that, by paying him in lieu of his accrued entitlement for the final year of his employment, the employer had broken any series of deductions and Mr Khan could not claim back through other years. The Khan decision is not binding on other tribunals.