Statutory Holiday Pay
Employees are entitled to 5.6 weeks paid statutory annual leave. For full time employees this will be 28 days, for part time employees this will be less.
Holiday pay entitlement is based upon a 5 day working week. The number of days worked a week is multiplied by 5.6 to find the entitlement. For example, if an employee works 3 days a week, they will be entitled to 3 multiplied by 5.6 (16.8) days paid annual leave. The statutory annual leave entitlement is limited to 28 days, therefore even if an employee works 6 days their statutory annual leave will be capped at 28 days.
Employers can provide for additional paid holidays through the contract of employment if they wish to and these can be subject to any terms of the employers choosing since they are not legally required holidays. This means, for example an employer can stipulate that the employee must have been working with them for 6 months before they can have accrued any additional paid holiday.
Other statutory leave cannot be taken concurrently with annual leave. Therefore, maternity, paternity, parental and sick leave are all considered separately.
Statutory annual leave must be paid to employees at the same rate as any other working day. This means that their monthly wage (or weekly etc.) will be the same as if they were not actually on holiday. This relatively simple principle is not always as straightforward as it sounds. For example, where an employee regularly works overtime but these working hours are not fixed under the contract of employment, then they will only qualify for the lower contractual hours and not the usually worked overtime hours.
Annual leave is a right accrued over a period of time. However, it is common for employers to allow employees to take annual leave before the leave has fully accrued. The accrual period though includes when an employee is on maternity, paternity, adoption or sick leave. A recent judgement has determined that even where an employee is off for most of the holiday year, they are still entitled to their statutory annual leave. Employees are also entitled to choose to use their paid holidays over sick leave.
Employers are liable to make payment in lieu of any annual leave which has not been used by the employee before the contract of employment comes to an end. Where an employer provides more than the legal minimum paid holiday this will depend on the terms of the contract of employment and they can expressly provide that any extra paid holiday will not be subject to payment in lieu conditions.
It is essential that the contracts of employment provide for certain conditions regarding the taking of holidays if the employers’ interests are to be protected. In order to alleviate potential problems these are the sorts of things employers should consider providing for in their contracts of employment or employee handbooks:
- Notice periods for booking holidays, particularly around busy periods and whether or not holiday is permitted to be taken around certain busy periods.
- Remind employees that holidays can be refused or postponed.
- Specify how the allocation of holidays will be made, for example on a first come first served basis.
- Stipulate whether or not public and bank holidays are included as part of the statutory annual leave and if not whether the rate of pay will be higher for those working on these days.
- Specify a maximum number of days an employee can take at once.
- Specify whether holidays can be carried over to the next holiday year and information about when the holiday year runs from.
- Stipulate whether there are any periods of mandatory holiday where the business is closed.
- Stipulate whether unpaid leave can be taken and the terms attached.
A common mistake made by employers is failing to include a term in the contract of employment to recoup pay for employees who have left throughout the holiday year having taken more holidays than they have accrued. There is no automatic right for the employer to recoup payment for ‘over taken’ holidays despite there being the right of employees to receive payment in lieu of holidays not taken. Thus employers should work up an agreement in the contract of employment to cover such a situation should it arise.
Prohibition against ‘rolled up’ holiday pay
Employers should not be tempted to provide ‘rolled up’ holiday pay as this has been deemed to be unlawful. This is where the normal hourly rate of the employee includes part of their holiday pay entitlement, rather than paying annual leave as normal when the employee is actually on holiday.
Employers should consider providing their employees with an Employee Handbook which contains detailed information on their holiday entitlements. Ensuring employees know their entitlements from the outset makes for a more open workplace and reduces the number of disputes.
Employers facing any difficulty with holidays or holiday pay entitlements should consult specific legal advice as the law continues to be very active in this area. For bespoke holiday pay advice or general employment law advice contact John Carruthers Solicitors and Solicitor Advocates.