In Souter v Royal College of Nursing a tribunal in Scotland held that Ms Souter was not entitled to sick pay for previous years when her employer had paid her in lieu of her final year’s holiday entitlement on termination of her employment. The tribunal also considered the relationship between PHI benefits and statutory holiday pay.

Ms Souter was an administrative assistant for the RCN. She commenced long term sickness absence on 7 November 2001 and remained off sick until her retirement in 2010. By that time she had been receiving benefits under the RCN’s permanent health insurance scheme. At no time during her sickness absence did Ms Souter ask to take annual leave or request holiday pay prior to the termination of her employment. On her retirement RCN paid Ms Souter a sum in respect of holiday pay for the last part year of her employment. Ms Souter brought a claim for unlawful deduction from wages in respect of statutory holiday pay in respect of her whole period of absence.

The tribunal held that as the RCN had paid her last year’s holiday pay on termination of employment Ms Souter was out of time to bring a claim in respect of the earlier deductions. The tribunal also held that Ms Souter had suffered no loss in any event since she had been paid throughout her period of sickness, first through the RCN sick pay scheme and thereafter by way of PHI benefits. From the time she started receiving these benefits, there was an effective variation in her contract of employment. The variation was that the sum she was entitled to by way of payment was the lower PHI sum not full pay.

As a tribunal decision this is not binding on other tribunals and it will be interesting to see whether other tribunals decide similarly.