Employees and workers regularly rank their entitlement to annual leave as one of the most important benefits they receive from their employer.
Many spend a significant amount of time planning what they will do during their annual leave — whether that involves taking time off for a honeymoon or just to spend time with family and friends. But from an employer’s perspective, dealing with an employee’s right to annual leave can cause problems.
Employees are entitled to 5.6 weeks’ annual leave per year, says Mark Stevens, a solicitor at Veale Wasbrough Vizards.
In simple terms, this amounts to 28 days per year for those who work five days a week. Stevens makes the point that a part-time worker’s allowance is reduced pro-rata and public holidays can count towards annual leave.
For those working less regularly, such as shift workers, the situation is more complex. Stevens says: “Here an employer must calculate the amount of leave based on the average shifts worked during the 12-week period immediately prior to the requested leave period.”
Naturally the law only sets the minimum, so an employer is free to offer more than statutory holidays with the extra holiday considered to be contractual holiday entitlement.
Bank and public holidays
Contrary to popular myth, there is no statutory right to bank or public holidays.
This is why Stevens advises that the first thing to consider is the contract of employment: “If, for instance, the contract says that staff are entitled to 28 days’ holiday plus bank or public holidays, then employees are contractually entitled to take bank or public holidays off.”
In contrast, if the employee has no written contract, or their contract states that they are entitled only to “statutory holiday” then, says Stevens, the employee has no express legal right to bank or public holidays. He adds: “If an employee wishes to take leave on a bank or public holiday it is a matter for discussion with the employer, as for any other request for leave on any other day of the year.”
Of course, employees may possibly gain the right to bank or public holidays if the business always allows them to take this time off.
Parity with full-time workers extends to part-timers in terms of contractual rights to bank or public holidays because they have a right to a pro-rata equivalent of their full-time colleagues.
“It does not matter that the part-time worker does not normally work on the day on which the bank or public holiday falls,” Stevens says. “So an employee who works Tuesday, Wednesday, Thursday will be entitled to three-fifths of the annual bank or public holidays that are occurring that year, even though they never actually work on a Monday or Friday.”
Levels of pay
Getting down to the nuts and bolts of pay, the law says employees are entitled to a week’s pay for each week of annual leave.
Stevens states that for employees with normal, regular, hours of work this generally means their basic salary without any bonus or irregular payments taken into account.
But calculating a week’s pay becomes more complicated where an employee’s pay fluctuates (for example where the person’s pay is linked to a shift pattern which varies).
In these circumstances, says Stevens, holiday pay will be based on their average pay for those normal working hours during the previous 12 working weeks.
Entitlement to tips, gratuities and overtime pay
The European Court of Justice (ECJ) recently found that a salesman paid partly by regular salary and partly by commission should be paid holiday pay that includes commission.
Stevens believes this may have implications for employees with a contractual entitlement to tips or gratuities.
He says: “An employee whose remuneration package includes entitlement to tips, and those tips form a regular part of his or her salary, may argue they will be placed at a financial disadvantage when taking statutory annual leave as they will not have an opportunity to earn tips during that period.”
Stevens thinks an employee could try to argue that they will be deterred from taking leave if their holiday entitlement does not take into account the tips they would have received had they been in work.
"Holiday pay of a salesman paid partly by regular salary and by commission should include both"
The legal position in relation to this is currently unclear, but employers may wish to consider the way in which they take tips into account when calculating how much they should pay their employees during their annual leave.
Whether an employer should take payments linked to a worker’s overtime into account when calculating holiday pay will be considered by the Employment Appeal Tribunal at the end of this month.
Other rights
When the right to annual leave was first introduced, employers often gave casual workers with irregular working patterns “rolled-up holiday pay” (with their holiday pay included within their regular wages payments), in order to try to avoid paying an employee while they were not in work.
The ECJ, as Stevens points out, ruled that rolled-up holiday pay is unlawful because it means that a worker receives no pay while they are actually on holiday.
Last month, as a further example of the evolving case-law in this area, the BBC reported that the ECJ had determined that holiday benefits should not be lost when an employee dies before claiming them.
The ECJ’s decision appears to mean that compensation for the lost holiday entitlement should pass to the employee’s estate in those circumstances.
Handling holiday requests
Making holiday requests is one thing but getting permission can be quite another.
Says Stevens: “Where an employee wants to take holiday at an inconvenient time, an employer can serve a counter-notice on an employee to state that their holiday request cannot be accommodated.”
In this situation, the counter-notice must be given to the employee at least as many calendar days before the requested leave begins as the number of days which the employer is refusing.
Stevens says that it’s also possible for employers to give notice ordering an employee that they must use their statutory holiday on specified dates. But, as with normal holiday-request refusals, this notice must be at least twice the length of the period of leave that the employee is being ordered to take.
Unused holiday
The subject of what to do with unused holiday often arises and the default position set by the law is that unused statutory holiday expires at the end of the holiday year.
“This means an employee is not entitled to carry statutory holiday over, or to be paid in lieu of unused statutory holiday,” says Stevens, “although there are exceptions”. (see Special Cases section, below).
In practice, he sees employers sometimes agreeing that staff may carry over unused holiday into subsequent holiday years.
In general, the only time employees should be paid for their annual leave is on the termination of their employment.
So the law on holiday entitlement is quite complex. Employers in any doubt should seek advice — employees will if they feel the need.
Special cases
■ Maternity leave
Women on maternity leave continue to accrue holiday during their leave. A woman taking her full maternity leave entitlement of 52 weeks will accrue a full year’s holiday entitlement.
■ Sick leave
An employee continues to accrue statutory holiday during sickness absence, even if they are absent for the whole holiday year. This means an employee who has exhausted their sick pay entitlement could request to take paid holiday during their sickness absence.
■ Sickness while taking annual leave
The ECJ has previously held that a worker who becomes unfit for work during a period of their statutory leave must be entitled to reschedule the period of their planned leave that coincided with the period of their sickness.