ACAS Update: Holidays and Holiday Pay – the latest

Here is the latest employment update from ACAS on Holidays and Holiday pay.

 

Under the Working Time Regulations 1998, workers (including part-time, zero hours and most agency and freelance workers) have the right to at least 5.6 weeks/28 days paid leave each year which can include public and bank holidays.

Four weeks of this entitlement comes from UK legislation and the additional 1.6 weeks comes from European legislation.  It is up to an employer when a worker can take leave, as long as they do allow them to take their full entitlement at some point during the year.

There is no statutory entitlement to paid leave for public holidays (bank holidays, public holidays, holidays by royal proclamation e.g for royal weddings).  Paid public holidays can be counted as part of the statutory 5.6 weeks’ holiday entitlement under the Working Time Regulations 1998.  However, employers can give workers a contractual right to paid time off or, the right to paid leave may have built up through custom and practice.

It is good practice to provide workers with written details of their annual leave entitlement, any procedures for requesting leave and policies on when leave can or cannot be taken, and confirmation of when the leave year begins and ends.  This is commonly from 1 January until 31 December or 1 April until 31 March.  If there is nothing in writing about when a workers leave year begins, then it is taken as beginning on the date they started work.

Part-time workers must not be treated less favourably than full-time employees so are entitled to at least 5.6 weeks leave, and will be paid their part time wages for each of those weeks.  Sometimes it is easier to calculate part-time workers annual leave in hours (e.g. a full time employee working 37.5 hours per week would be entitled to 37.5 x 5.6 = 210) and give them a pro rata equivalent so a part time employee working 16 hours a week would be entitled to 16 x 5.6 = 89.6.

Casual workers or those on zero hours contract are also entitled to the equivalent of 5.6 week paid leave.  If their hours and therefore their pay varies from week to week, holiday pay should be calculated as an average over the preceding 12 weeks worked. If there is a week where no work is carried out, ignore this week and go back a week further.  Some employers prefer to calculate holiday pay for those with variable hours as a percentage (12.07%, which is the equivalent of 5.6 weeks expressed as a percentage) of their total wages.  However, it is important that they are paid when they take leave (or nominate a period when they are not working as leave) and not paid a holiday allowance on top of their normal wages, as this could look like “rolled up holiday” which is unlawful.

Gov.uk has more detailed information on holidays and holiday pay and has also developed a ‘ready reckoner’ to help calculate holiday entitlement. This can be found under ‘working, jobs and pensions’ at https://www.gov.uk/calculate-your-holiday-entitlement.

There have been a number of important cases in the last few years on what employers need to include when calculating holiday pay.

It is common for employers to believe that workers’ basic pay was all that had to be included in holiday pay calculations.  And this used to be the case.

However, a number of judgments in the last few years have found that employers now have to take account of other payments when working out holiday pay including:

  • Guaranteed and normal non-guaranteed overtime should be considered when calculating a worker’s statutory holiday pay entitlement but there is currently no definitive case law that suggests voluntary overtime needs to be taken into account.
  • Commission should be factored into statutory holiday pay calculations.
  • Work-related travel may need to be factored into statutory holiday pay calculations.
  • A worker’s entitlement to holiday pay will continue to accrue during sick leave.
  • There are different rules for calculating holiday pay depending on the working patterns
  • Workers must take their statutory paid annual leave allowance and can only be ‘paid in lieu‘ for this when their employment ends.

Basically, if a worker’s normal pay is made up of these elements, they should also be included when they are on holiday so that they are not deterred from taking their annual leave because they will be worse off financially.

There have also been a number of important cases around holiday and sickness.  Entitlement to annual leave continues to accrue during periods where a worker is absent from work due to sickness.

If a worker has not taken annual leave due to sickness they must be permitted to take their annual leave during another period and if necessary carry over their entitlement into another leave year in order for this to be possible.  However, a limit can be placed on the length of the carry over period.

The above principles only apply to the basic 4 weeks (20 days) annual leave under the UK Working Time Regulations and not the additional 1.6 weeks (8 days) under the European legislation.

Where a worker feels that they have been underpaid for their holiday, they can claim at an Employment Tribunal.  However, there is a limit to how far back they can claim, currently 2 years for claims received on or after 1 July 2015.

To find out more about holiday entitlements visit www.acas.org.uk/holidaypay or call the Acas Helpline on 0300 123 11 00 for free confidential and impartial advice.

ACAS