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Top 10 Things You Should Know About Holiday Pay

Holiday Pay Legislation is a Hot Topic

For many and as businesses and workers start planning leave for the summer holidays, it is essential to know the basics of holiday rights in employment. Here are 10 key facts which you should

  1. As a minimum, all workers are entitled to 5.6 weeks paid holiday each year (equal to 28 days including Bank Holidays for those working 5 days a week). It may be that the contract of employment offers enhanced leave entitlements but as a minimum, all workers should be given 5.6 weeks (or the pro-rata equivalent if working part-time).
  2. An employer is entitled to include any bank or public holidays as part of a worker’s paid holiday allowance. There is no legal right to be paid for public holidays where these do not form part of a worker’s annual holiday entitlement. The exact details of a worker’s holiday entitlement should be clearly set out within a written contract of employment.
  3. There is no absolute right to take holiday at times of a worker’s choosing and holidays must be taken at times which are practicable and convenient with the employer.
  4. Workers cannot decide to take payment in lieu of holiday unless their employment has terminated in which case they are entitled to payment in lieu of any accrued but untaken holiday for that year.
  5. If workers are sick during a pre-booked holiday, new case law (and forthcoming legislation) provides that they may in some circumstances be able to claim back the holiday time for the period that they were sick and even roll that extra time into next year’s holiday allowance.
  6. Following a number of recently reported cases, it has been ruled that it is wrong for employers to only take into account basic pay for the purposes of calculating how much a worker should be paid while they are on holiday. A worker is entitled to receive “normal” pay during their annual leave. According to the Employment Appeal Tribunal, “normal” constitutes payments which have been made for a sufficient period of time and be “intrinsically linked to the performance of the tasks which the worker is required to carry out under his contract of employment”. This includes commission payments, overtime (including voluntary), incentive bonuses and shift premiums. Please note that this will only apply to the European minimum 4 weeks of annual leave and not the extra 1.6 weeks that UK legislation confers.
  7. Where workers have no normal working hours, or have normal working hours but their pay varies according to amount of work done or the time of work, the Employment Rights Act 1996 stipulates that employers should use a reference period of the last 12 working weeks to calculate pay where necessary.
  8. Some employers have a practice of “rolled-up holiday pay” which involves not paying holiday pay whilst a worker is on leave but rather instead pays the worker an extra amount during the weeks that the worker works. This is unlawful unless it is clearly identifiable i.e. on a worker’s wage slip.
  9. If a worker has been unable to take annual leave because of sickness or a reason related to family-friendly rights i.e. maternity leave, they can carry over some of their unused leave to the next year and it is unlawful for an employer to refuse this.
  10. Workers can bring an unlawful deduction from wages claim if they have been underpaid their holiday pay within 3 months from the date of the underpayment, or unlawful deduction was made. Therefore it is of paramount importance that when holiday pay is being calculated, it is correct!

If you would like to discuss how, as a business, you are planning to handle holiday pay in the future (including revising any contracts or policies) or you are looking for advice in respect of your personal entitlements, please do not hesitate to contact a member of the employment team at Linder Myers and we’d be happy to help you.