When it comes to sick leave vs annual leave, the distinction matters more than most small employers realise. Someone calls in sick on a Monday and suddenly you're not sure whether to log it as sick leave, deduct it from their holiday allowance, or just let it slide and sort it out later.
The answer is that they are two completely separate legal entitlements, and treating them the same way can cause real problems — for your business and for your employees. Here's what you need to know.
What is annual leave?
Annual leave is the paid holiday entitlement every employee in the UK is legally entitled to. The statutory minimum is 5.6 weeks per year, which works out to 28 days for a full-time employee working five days a week — you can check exact entitlements using our holiday entitlement calculator. Bank holidays are included within that total, though you can choose to offer them on top as an additional benefit.
Annual leave is planned in advance (or at least requested in advance), and employees choose when to take it. It exists so that people can rest, recharge, and spend time away from work.
What is sick leave?
Sick leave is time off taken when an employee is genuinely too unwell to work. Unlike annual leave, it is not something an employee chooses or plans - it happens when it happens.
UK law does not set a minimum number of paid sick days. What it does require is that employees who meet the eligibility criteria receive Statutory Sick Pay (SSP) from the fourth day of absence onwards. SSP is currently £116.75 per week (2025/26 rate). Many employers choose to offer a more generous company sick pay scheme on top of this, though this is not a legal requirement.
The key differences
Here is a quick reference comparison across the dimensions that matter most for day-to-day management:
| | Annual leave | Sick leave | |---|---|---| | Purpose | Rest and personal time | Genuine ill health | | Pay | Full pay | SSP from day 4 (or company sick pay) | | Notice required | Yes — requested in advance | No — happens when it happens | | Accrues during absence | Yes | Sick leave itself does not accrue | | Employer can require it | Yes, with sufficient notice | No | | Documentation | None usually required | Self-cert up to 7 days; fit note after |
Can you deduct sick days from annual leave?
No. This is one of the most common mistakes small employers make, and it can get you into trouble.
If an employee is off sick, you cannot log that absence as annual leave or deduct it from their holiday entitlement - even if it would be more convenient for your records. Sick leave and annual leave are legally separate entitlements, and conflating the two could leave you exposed if an employee raised a complaint or claim.
The one exception worth knowing: if an employee requests to take annual leave while they are off sick, they are entitled to do so. This can sometimes work in everyone's interest — particularly when an employee has used up their sick pay entitlement but still needs time to recover. But it must be the employee's choice, not yours.
Having a clear leave policy that sets out how your business handles sick leave, annual leave, and the situations where they overlap is one of the best ways to avoid confusion and disputes before they start.
What about sick leave during annual leave?
This is where things get interesting. If an employee falls ill during a period of annual leave - say they go down with flu on day three of a two-week holiday - they are entitled to reclaim those days as sick leave and take the annual leave at another time.
To do this they would need to follow your usual sickness reporting procedure (calling in, self-certifying, etc.) even while on holiday. It sounds awkward, but the right is there in UK law following a European Court ruling, and it applies to your business regardless of size.
Practically speaking, most employees do not bother claiming this unless the illness is serious or prolonged. But it is worth having a clear policy so everyone knows what to do if it arises.
Do employees accrue annual leave while off sick?
Yes. This catches a lot of small employers by surprise. If an employee is on long-term sick leave, they continue to accrue their full annual leave entitlement throughout that period. And if they cannot take that leave before the end of the leave year because of their illness, they are entitled to carry it forward.
The carry-forward allowance is up to 18 months from the end of the leave year in which it was accrued. So if someone is off sick for most of the year, you could end up with a significant leave liability sitting in your books when they return.
This is another reason why tracking sick leave and annual leave separately - and accurately - really matters.
How to handle sick leave practically
For absences of seven days or less, employees can self-certify. You do not need a doctor's note, though you can ask employees to complete a self-certification form when they return. For absences longer than seven days, a fit note from a GP or other healthcare professional is required.
It is good practice to conduct a brief return-to-work conversation after any sick absence, however short. This does not need to be formal - even a quick five-minute check-in shows that you take wellbeing seriously, and research consistently shows it is one of the most effective ways to reduce short-term absence.
Frequently asked questions
Can an employee use annual leave when they are sick?
Yes — but only if the employee chooses to. If someone is off sick and asks to convert those days to annual leave, you can agree to that. It sometimes makes sense when an employee has exhausted their sick pay and would prefer to receive full pay instead. What you cannot do is make that decision for them.
Can an employer ask an employee to take annual leave when sick?
No. You cannot require an employee to use annual leave during a period of sickness absence. Sick leave is not something the employee is choosing to take, and requiring them to use their holiday entitlement during that time would be unlawful. If you are looking for flexible ways to manage working time, it is worth also understanding how time off in lieu (TOIL) works as a separate arrangement.
What happens to annual leave accrued during sick leave?
It accrues as normal. Employees continue to build up their holiday entitlement throughout a period of sick leave, including long-term absence. If illness prevents them from taking that leave before the end of the holiday year, they can carry it forward — for up to 18 months in cases linked to long-term sickness.
Can sick leave affect annual leave entitlement?
Sickness does not reduce an employee's annual leave entitlement. The risk tends to run the other way — a long period of sick leave can create a larger leave liability for the employer, because accrued but untaken leave carries forward. This is worth keeping an eye on if you have someone on an extended absence.
Why clear records matter
If you are tracking sick leave and annual leave in the same spreadsheet - or worse, not tracking them separately at all - you are storing up problems. Without clear records you cannot accurately calculate SSP, you cannot spot patterns in absence that might flag a wellbeing issue, and you cannot defend yourself if an employee disputes their leave balance.
A simple, dedicated system does not need to be complicated. It just needs to log the right type of absence against the right person, and keep a clear history that everyone can refer back to.
Absently tracks annual leave and sick leave separately as standard, so your records are always accurate and up to date - without you having to think about it. Try it free for 30 days - no credit card needed.