If an employee is ill while on holiday, they can take the time off as sick leave instead. The employee will then be able to use their holiday entitlement at a different date. You will pay sick pay rather than holiday pay for the days that they take as sick leave.
Clearly there is a risk that employees will claim to have been ill while on holiday so that they can take more holiday later. This may be particularly the case if you offer generous levels of sick pay or employees’ normal salaries are not substantially higher than statutory sick pay.
You can discourage any abuse of this kind by having a sickness absence policy and making it clear that the policy applies for any sick leave. So if an employee falls ill on holiday, they will need to notify you, provide a doctor’s fit note (for illnesses of more than a week) and so on.