Why This Question Comes Up Constantly in UK HR Teams

TimeClock 365 hears a version of this question every time an employee is off sick for more than a few days: does the sick day come out of statutory sick pay, or should it be booked as annual leave instead? And if a worker is off sick for months, does their holiday entitlement keep building up, or does it freeze until they're back? Statutory sick pay (SSP) and statutory annual leave are two entirely separate legal entitlements, and they interact in ways that catch out even experienced payroll teams - especially now that SSP rules are changing from April 2026.

SSP and Holiday Pay Are Different Entitlements, Not Alternatives

Statutory sick pay compensates a worker for time off due to illness. Statutory annual leave (5.6 weeks per year under the Working Time Regulations 1998) compensates a worker for rest and recovery time, regardless of whether they've been ill. A worker cannot receive both SSP and holiday pay for the same day - they are mutually exclusive for any single day - but a worker's entitlement to one does not cancel or reduce their entitlement to the other over the course of a year. An employee who has used up all their SSP (currently capped at 28 weeks) does not lose their statutory holiday entitlement as a result.

Does Annual Leave Still Accrue While Someone Is Off Sick?

Yes, and this is the point most likely to be missed in manual leave tracking. According to ACAS guidance, workers continue to accrue their full statutory holiday entitlement while off sick, whether they are receiving SSP, contractual sick pay, or no pay at all, as long as the employment relationship continues. Accrual is not linked to pay status. A worker who has been off sick for three months on SSP has still built up three months' worth of statutory leave in the background, and that entitlement doesn't disappear.

Can a Worker Take Holiday Instead of Being Off Sick?

A worker can choose to use paid annual leave while they are off sick, and an employer cannot force this - the choice belongs to the worker. This might make sense for someone who isn't well enough to work but is well enough to take a break, or someone whose recovery might genuinely benefit from a holiday. If an employer approves the request, the sick leave is effectively paused for those days, SSP stops accruing for that period, and the worker receives normal holiday pay instead. The reverse is also true: an employer cannot require a worker to take annual leave instead of sick leave just to avoid paying SSP.

Carry-Over of Holiday Missed Due to Long-Term Sickness

Because it's often not possible for someone on long-term sick leave to actually take their statutory holiday, UK case law (including the Pereda and Stringer line of rulings, applied domestically in cases like NHS Leeds v Larner) established that up to 4 weeks of statutory leave can be carried over into the next leave year if illness prevented it from being taken. This carried-over leave must generally be used within 18 months of the end of the leave year in which it accrued. This is a distinct mechanism from ordinary "use it or lose it" leave, which does not carry over automatically.

The 2026 Statutory Sick Pay Changes and What They Mean for Holiday Tracking

From 6 April 2026, statutory sick pay becomes payable from the first day of sickness absence, removing the three "waiting days" that previously meant no SSP was paid until day four. The rate is also changing so that lower earners receive the lower of 80% of their average weekly earnings or the standard statutory rate, rather than being excluded below the previous earnings threshold. These changes affect how much SSP is paid and from when, but they don't change the separate holiday accrual rules above - workers keep accruing statutory leave throughout a sickness absence exactly as before. Employers should check that payroll and leave systems apply the new SSP start date correctly without accidentally altering how holiday accrual is calculated for the same absence.

Practical Steps for Getting the Interaction Right

  • Track holiday accrual continuously during sickness absence, independent of whether SSP, contractual sick pay, or no pay is being paid for those days.
  • Record any days where a worker chooses to take approved annual leave instead of sick leave, so SSP and holiday pay are never both claimed for the same day.
  • Flag statutory leave that couldn't be taken due to long-term sickness so it's carried over correctly, with the 18-month use-by deadline tracked separately from ordinary leave.
  • Update SSP calculation logic for the 6 April 2026 changes (no waiting days, revised low-earner rate) without touching the separate holiday accrual logic for the same absence period.
  • Keep a clear record of which entitlement - SSP or holiday pay - was paid for each day of an absence, for audit and dispute purposes.

How TimeClock 365 Helps

TimeClock 365's leave management module keeps holiday accrual running automatically during sickness absence, independent of SSP status, and flags leave that couldn't be taken due to long-term sickness for correct carry-over with its 18-month deadline. Combined with our HR compliance reporting, employers get a single, audit-ready view of exactly which entitlement - sick pay or holiday pay - applied on any given day, which matters both for day-to-day payroll accuracy and for defending decisions if a dispute arises.

Frequently Asked Questions

Can an employee get both statutory sick pay and holiday pay for the same day?

No. SSP and holiday pay are mutually exclusive for any single day - a worker receives one or the other, not both, for the same period of absence.

Does annual leave keep building up while someone is off sick long-term?

Yes. Statutory annual leave continues to accrue during sickness absence regardless of whether the worker is receiving SSP, contractual sick pay, or no pay at all, as long as their employment continues.

Can an employer make an employee take holiday instead of sick leave?

No. The choice to take annual leave instead of sick leave belongs to the worker, not the employer. An employer also cannot require a worker to take holiday to avoid paying SSP.

What happens to holiday a worker couldn't take because they were off sick long-term?

Up to 4 weeks of statutory leave can be carried over into the following leave year if long-term sickness prevented it from being taken, and it must generally be used within 18 months of the end of the leave year in which it accrued.

How is statutory sick pay changing from April 2026?

From 6 April 2026, SSP becomes payable from the first day of sickness absence rather than after three waiting days, and lower earners receive the lower of 80% of their average weekly earnings or the standard statutory rate.

Do the 2026 SSP changes affect how holiday accrues during sickness?

No. The 2026 changes affect the amount and start date of sick pay itself; they don't change the separate rule that statutory holiday entitlement keeps accruing throughout a sickness absence.

This article is for general information and does not constitute legal advice. For guidance specific to your business, consult ACAS or a qualified employment law solicitor.