Holiday Pay and Leave

13 September 2012 | W.E.U Admin | Workplace Wellbeing

Adapted from a guide by SmallBusiness.co.uk.

Holiday Leave and Pay: The Law

The Working Time Regulations 1998 (The Regulations) set out the statutory framework for holiday entitlements. Individuals who are genuinely self-employed are not covered, unless their contract deems them workers. Recent case law has clarified that subcontractors and other contingent workers may qualify as workers if they are required to perform personal service.

The Right to Holidays

Under the Regulations, all workers are entitled to a minimum of 5.6 weeks’ paid leave per holiday year, including public and bank holidays. Employers may offer more leave but cannot offer less. Holiday entitlement accrues from day one at a rate of one-twelfth of the annual entitlement, rounded up to the nearest half-day.

The holiday year is defined by a relevant agreement (e.g., contract, workforce or collective agreement). Absent an agreement, it runs from the employee’s start date. Statutory entitlement must be taken within the holiday year or is forfeited, unless additional leave is carried over as per contract. Following Sood Enterprises v Healy [2013], workers on long-term sick leave may carry over four weeks of untaken statutory holiday.

On termination, untaken holiday must be paid in lieu (pro-rata) and cannot be rounded down. Conversely, if a worker has taken excess leave, the employer may deduct from pay if the contract allows.

For more details, visit our Holiday Pay and Leave Overview.

Notification of Holidays

Workers must provide written notice of holiday requests, equal to twice the length of the holiday. Employers wishing to refuse must also reply in writing within a period equivalent to the holiday length. These terms can be varied by agreement. Employers may fix certain holiday periods (e.g., a Christmas shutdown) by giving twice the length of the fixed holiday as notice.

Holiday Pay

Statutory holiday pay is a week’s pay per week of leave. For workers with fixed hours, pay is based on normal weekly pay; overtime is excluded unless guaranteed by contract. In Neal v Freightliner, the Birmingham ET held that overtime must be included for the four-week minimum holiday under EU law, currently under appeal.

Where pay varies, calculate a week’s pay based on the average remuneration over the previous 12 weeks, disregarding weeks with zero pay. If offering additional leave beyond the 5.6 weeks, employers can contractually define the pay basis for the extra days. Employers cannot pay in lieu of statutory leave except on termination.

Learn more: Statutory Holiday Pay Calculator.

Part-Time Workers

Part-time workers are entitled to a pro-rata share of the 5.6 weeks’ leave. For example, a three-day-per-week worker receives 3/5 of 5.6 weeks, equating to 16.8 days. Employers may round up for administrative ease but must not round down. Part-time workers cannot be treated less favorably than full-time staff without risking discrimination claims.

Tribunal Claims

Workers denied their statutory holiday rights may bring an Employment Tribunal claim within three months of the breach. Dismissing an employee for asserting these rights is automatically unfair, regardless of qualifying service. Employers should ensure relevant agreements cover holiday years, notification procedures, and leave deductions to avoid default Regulation provisions, which can be less flexible.