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Holiday entitlement and holiday pay FAQ

All ‘workers’ have the statutory right to paid holiday.

A worker isn’t just an employee. Anyone who carries out work for an employer personally (except the genuinely self-employed) qualifies for statutory annual holiday, even if a written contract of employment is not in place.

Workers have the statutory right to a total of 5.6 weeks paid holidays each year, made up of 20 days basic paid holiday and 8 paid public (or bank holidays.)

For a 5 day a week worker this equates to 5.6 X 5 = 28 days.

For a part time worker on say 3 days a week it is 5.6 X 3 = 16.8 days.

However, for a worker who has variable hours or days of employment, the employer is normally required to calculate his or her holiday entitlement on an ongoing basis. The government provides a handy calculator for working out holiday entitlement.

Workers are entitled to receive their normal rate of pay for their holiday. This is often the rate of pay as defined in the contract of employment and any subsequent amendments. If the contract of employment stipulates 8 paid hours per day then the holiday is remunerated at that rate. Voluntary additional hours (e.g. overtime) are not normally considered for the purposes of holiday pay.

But an employee with irregular pay is less straight forward and the employer in these circumstances would need to calculate the average take home pay, for example in the 12 weeks prior to the holiday to be taken, to establish what the appropriate pay rate should be.

The calculations for holiday entitlement and pay will need to be carried out more frequently for short service employees.

Recent case law has amounted to a requirement on employers to calculate holiday pay on the basis of the employee’s current rate of pay including commission payments, overtime and travelling-time allowances. There is no set guidance with regards to how this should be worked out however it is advisable to calculate the average take home pay for the 12 weeks prior to the holiday taken. This is a complex and ever changing area at present so please contact us if unsure.

Holiday rights accrue from the day a worker starts work.

In the absence of a contractual term to the contrary, a worker needs to give twice the notice of a holiday requested (i.e. 2 weeks notice for a 1 week holiday) and if choosing to refuse the holiday the employer must give at least equivalent notice of the holiday to be refused (i.e. a week for a 1 week holiday requested).

Typical employment law pitfalls

Problems often result from the employer not realising that he has to pay holidays, e.g. for casual workers. Employers should not opt to pay holiday rather than let employee’s take holiday (even if the employee asks for this) as this can result in a breach of the Working Time regulations which were, after all, designed to ensure people have sufficient rest away from work.

Holiday continues to accrue during maternity leave and problems can sometimes occur if the woman is unable to take all of her accrued holiday before the end of the leave year (assuming holiday cannot be carried over – see below). In some circumstances the woman may choose to end maternity leave early and switch to holiday to ensure holiday is not lost.

Similarly holiday pay continues to accrue during sick leave and case law would suggest that a worker returning from long term sick should be given the opportunity to take their accrued holiday even if the leave year has expired. Recent case law suggests however that leave should be taken within 15-18 months of it being accrued. If they have been unable to take it then payment in lieu of annual leave should be made for the statutory basic leave entitlement of 20 days (4 weeks) as per the Working Time Regulations 1998.

As the UK workforce demographic becomes more diverse, employees from a wide range of religions and beliefs might request to take leave during religious festivals that aren’t linked to the Christian faith recognised by public holidays. In view of this, employers that do not follow good practice could be at risk of discriminating on the basis of religion. It is in an employer’s interests to make every effort to consider and accommodate the needs of employees who practise different religions. A standardised and flexible approach to annual leave goes some way to reducing this risk.

Many employers fail to enjoy the flexibility that a well worded contract could afford them. Contractually an employer can define for example:

  • holiday leave years;
  • how many, if any, untaken days can be carried forward from one holiday year to the next (simplifying admin)
  • standard holidays the employee is required to take (Christmas etc.)
  • rules on how much notice the employee has to give (more notice provides for easier planning)
  • rules governing circumstances when the employer can require an employee to take holiday or not (e.g. preventing holiday in the busy season)
  • rules requiring employees to fill in request forms
  • rules regarding how sickness will be treated before, during and after holidays

Help and support

We are happy to assist our clients to develop bespoke local rules for holidays and to amend contracts of employment to provide the best fit holiday solutions for each individual clients’ business requirements.

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