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August 2011 Newsletter

August 28th, 2011

Holidays and Holiday Pay

Who is entitled to paid annual leave?

Most ‘workers’ are entitled to paid holiday under the Working Time Regulations.  Note that it is workers and not just employees who are entitled.  The term ‘worker’ (as legally defined) includes employees but it can sometimes also include people who are described as self-employed.

How much holiday is someone entitled to?

The Working Time Regulations permit all ‘workers’ to a minimum of 5.6 weeks’ holiday in any holiday year.  So, for someone who works 5 days per week, that person is entitled to 28 days’ holiday per year (i.e. 5 x 5.6). 

Under the statutory scheme, the maximum entitlement is for 28 days holiday per year.  So, if someone works 6 days per week, his/ her entitlement is still 28 days.

The statutory entitlement to annual leave includes Bank Holidays. 

Workers in their first year of employment accrue their holiday entitlement at a rate of one twelfth of their annual entitlement on the first day of each month of their first year.


What happens when someone leaves?

If someone’s contract is terminated (for whatever reason) they are entitled to a payment in lieu of their statutory annual leave which has accrued to the date of the termination of the contract, less any holiday actually taken.

For example, if someone leaves on 30th June and the holiday year started on 1st January and that person has taken no holidays, he or she would be entitled to a payment equivalent to 14 days’ pay (i.e. half his or her entitlement). If that person had not worked bank holidays and been paid for those days, then he or she would be entitled to a payment equivalent to 9 days’ pay (14 days accrued holiday less 5 bank holidays taken).


Can an employer state when holidays are to be taken?

The short answer is yes.  However, there are some limits on the employer’s discretion. 

Firstly, the employer must allow statutory holiday entitlement to be taken.

Secondly, a worker can request a period of holiday by giving notice to the employer.  This notice must be given twice the number of days in advance of the period of leave as the worker proposes to take. For example, if the worker asks for to 2 weeks’ leave, he or she must give notice of intention to take that leave at least 4 weeks in advance of the first day of that leave.

If such a notice is given, the employer can refuse the period of leave by giving notice equivalent to the number of days which the worker has proposed to take.  So, if the worker wanted 2 weeks’ leave, the employer must give notice refusing the request for leave at least 2 weeks in advance of the first day of the proposed period of leave.

Thirdly, if an employer wants to instruct a worker to take leave, he or she can give notice to the worker instructing the worker to take leave provided that the notice is twice the number of days of the period of leave which is to be taken. 

Some employers stipulate times of the year when employees must take holiday (e.g. if there is a shut down in the summer or between Christmas and New Year).  This is acceptable provided that the notice provisions are complied with.  One way of ensuring that notice provisions are complied with is to stipulate in a contract that annual leave is to be taken at certain times.

Fourthly, workers and employers can agree when holiday is to be taken and do not have to follow the notice provisions.  An employee might ask for leave at short notice, and the employer can agree. If an employer does not adhere to such an agreement that could amount to a breach of contract.

Special rules apply to workers in their first year – see above.


What happens to employees or workers who are on long term sick?

Employees or workers on long-term sick leave still accrue their statutory holiday entitlement.  This means that if, say, an employee has been on sick leave for a long time, and his or her contract of employment is terminated because he or she is no longer considered capable of work, then the employer will have to pay a sum in lieu of any holiday which has accrued during the sick leave period.  This will include holiday which accrued during the sick leave period but in the previous holiday year.


How much holiday has to be paid?

Calculating holiday pay for people who work the same hours and are paid the same amount each week or month should not be difficult, as they are entitled to the pay which they would normally receive had they been in work.

It is a little more complicated for those workers who do not have set contractual hours or who, for example, are paid on a piece work basis.

There are specific rules as to how to calculate a week’s pay (Employment Rights Act 1996 Sections 221-224) in such circumstances.  In summary, it is often necessary to calculate an average based on the worker’s previous 12 weeks wages. 


Contractual Entitlements

So far only statutory entitlements have been discussed.  Many employers provide more generous holiday entitlements than those provided for in the Working Time Regulations.  Care, therefore, should always be taken to ensure that you are adhering to the employee’s or worker’s contract.

A contractual term, which allows for fewer days’ holiday than the statutory minimum, or entitlements less generous than provided for by the Working Time Regulations, will not be enforceable.

It is generally advisable to set out details relating to holidays in a contract, particularly if you want to set down rules restricting when holidays can be taken.


Women on maternity leave

 Contractual and statutory annual leave accrues whilst a woman is on statutory maternity leave.


Automatic Unfair Dismissal

If an employee is dismissed for attempting to enforce a right under the Working Time Regulations, or for refusing to forgo any rights under those Regulations, the employee is likely to have a claim for unfair dismissal (this will also apply to employees who do not have one year of continuous service). 

A worker who suffers a detriment for trying to enforce a right under the Working Time Regulations or for refusing to forgo any such rights can make a claim to a Tribunal.  In the case of a worker who is not an employee this can include a claim that his or her contract was terminated for seeking compliance with the Working Time Regulations.


Can holiday pay be clawed back?

An employer can only claw back holiday pay upon termination of an employee’s or worker’s contract (if more holiday has been taken than has accrued at the date of termination) if there is a written agreement permitting this.

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