Mark Stevens on holiday payments
EMPLOYEES and workers rank their annual leave entitlement as one of the most important benefits that they receive. But there are a number of issues that employers should be aware of.
Employees are entitled to 5.6 weeks’ annual leave a year which amounts to 28 days a year for those who work five days a week. A part-time worker’s allowance is pro rata. Public holidays can count towards a worker’s entitlement to annual leave.
For shift workers, an employer must calculate leave based on the average shifts worked during the 12-week period immediately prior to the requested leave period. An employer is free to offer more than statutory holiday; the extra holiday will be considered ‘contractual holiday entitlement’.
There is no statutory right to bank or public holidays. However, if 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.
Part time workers who have a contractual right to bank or public holidays have a right to a pro-rated 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/public holiday falls.
Employees are entitled to a week’s pay for each week of annual leave. For employees with normal, regular, hours of work this generally means their basic salary without any bonus or irregular payments taken into account.
Calculating a week’s pay becomes more complicated where an employee’s pay is linked to productivity or variable shift patterns. In these circumstances holiday pay will be based on their average pay during those normal working hours over the previous 12 working weeks.
Employers must also exercise caution when dealing with an employee whose remuneration includes commission. Recently the European Court of Justice (ECJ) found that a salesman paid partly by regular salary and partly by commission should be paid holiday pay that includes commission.
In another recent case the Employment Appeal Tribunal found that guaranteed overtime payments should also be taken into account when calculating holiday pay.
When the right to annual leave was first introduced, casual workers with irregular working patterns were often given ‘rolled up holiday pay’ (with their holiday pay included within their regular wages payments), by their employers in order to try to avoid paying an employee while they were not in work.
The ECJ, however, ruled that rolled up holiday pay is unlawful as it means that a worker receives no pay while they were actually on holiday.
Where an employee wants to take holiday at an inconvenient time, an employer can serve a counter-notice on an employee stating that their holiday request cannot be accommodated. A counter notice must be given at least as many calendar days before the proposed leave is due to commence as the number of days which the employer is refusing.
The default position set by the law is that unused statutory holiday expires at the end of the holiday year. This means that an employee is not entitled to carry statutory holiday over or to be paid in lieu of unused statutory holiday (there are exceptions. See the special cases below).
However, employers can agree that staff may carry over unused holiday into subsequent holiday years.
Generally, the only time that employees should be paid for their annual leave is on the termination of their employment. In these circumstances the employee is entitled to be paid in lieu of any accrued but untaken holiday entitlement.
There are a number of special cases
Maternity leave: Women on maternity leave continue to accrue holiday during their leave. So, a woman taking her full maternity leave entitlement of 52 weeks will accrue a full year’s holiday entitlement. The employer has the option of requiring the employee to take the holiday she will accrue either before or after her period of maternity leave.
Sick leave: An employee continues to accrue statutory holiday during sickness absence, even if they are absent for the whole holiday year. This means that an employee who has exhausted their sick pay entitlement could request to take paid holiday during their sickness absence.
Employers usually agree that employees who are prevented from taking their statutory holiday while they are on sick leave will be allowed to carry their unused holiday allowance over to the next holiday year.
Sickness during 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.
In the ECJ’s determination, an employee cannot be unfit to work and on annual leave at the same time.
Mark Stevens is a solicitor in the employment team at Veale Wasbrough Vizards.
This article has been reproduced from the Contract Flooring Journal. You can find them at www.contractflooringjournal.co.uk.