Managing staff leave gets complicated fast when sickness gets mixed up with holiday. It happens in every small business - 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 short answer is: sick leave and annual leave are two completely separate things, 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. This includes bank holidays, though you can choose to offer bank holidays on top of that 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
The distinction matters more than you might think. Here is a quick summary:
- Annual leave is planned in advance, paid at full pay, accrues over time, and the employee chooses when to take it. No documentation needed for most requests.
- Sick leave is unplanned, paid at SSP from day 4 (or company sick pay if you offer it), does not accrue, and requires self-certification up to 7 days and a fit note after that.
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.
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.
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.