Until very recently, under the Organisation of Working Time Act 1997 (the “OWTA”), employees did not accrue annual leave while absent from work on sick leave. However, on 1 August 2015 the Workplace Relations Act 2015 (the “Act”) amended the OWTA to bring Irish law into line with the European Working Time Directive to allow employees to accrue such leave.

What does this mean for employers?

Prior to 1 August 2015, employees were only entitled to accrue annual leave for time actually spent working. The OWTA now provides that, for the purposes of calculating an employee’s statutory annual leave entitlement, a day that an employee is absent from work due to certified illness is treated the same as a day the employee was at work performing his or her duties. The practical effect of this change is that an employee will continue to accrue his/her statutory annual leave entitlement during a period that he/she is absent from work on certified sick leave.

In addition, where an employee was unable to take all or any of his/her annual leave during a leave year due to a certified illness, accrued but untaken annual leave may be taken within the period of 15 months after the end of the employer’s leave year. Crucially for employers, this entitlement will be lost where more than 15 months has passed since the end of the leave year in which the annual leave was accrued.

By way of example:

Since 1 April 2015, Jane Doe has been absent from work on long-term sick leave. Her employer’s annual leave year runs from 1 April – 31 March. Jane returns to work on 1 October 2017. What is her annual leave entitlement?

Jane’s sick leave crosses two annual leave years as follows:

  • 1 April 2015 - 31 March 2016 (“Leave year 1”)
  • 1 April 2016 – 31 March 2017 (“Leave year 2”)

As the changes were only introduced by the Act on 1 August 2015, Jane is only permitted to accrue annual leave from 1 August 2015 onwards. On Jane’s return to work on 1 October 2017, more than 15 months will have passed since the end of the leave year 1 above. Therefore, Jane is only entitled to receive her accrued but untaken statutory annual leave from 1 April 2016 – 1 October 2017.

Annual leave calculation on termination

The OWTA now provides for a new method of calculating annual leave on the termination of employment. An employer must now have regard to the new definition of "relevant period" when calculating an employee's accrued but untaken statutory annual leave entitlement on the termination date.

For example, if the termination date occurs during the final three months of the 15 month period referred to above, the OWTA provides that when calculating the annual leave entitlement, an employer must look not only at the current leave year but also the two leave years immediately preceding the current leave year.

Practical implications for employers

These changes will have a significant effect on how employers manage annual leave for their workforce. Company handbooks, HR policies, internal annual leave management systems and payroll systems will need to be updated to reflect the changes outlined above to ensure that employers do not breach the new provisions of the OWTA.

In summary, it is worth remembering the following:

  • Employees still have no statutory entitlement to be paid while they are on sick leave.
  • The new changes are only applicable to employees who are on certified sick leave and who are unable to take their annual leave during the leave year.
  • A new calculation method has been introduced for calculating an employee’s annual leave entitlement on the termination of employment.
  • Payment in lieu of statutory annual leave can only be paid on termination of employment.