Payment in lieu and holiday carry-over

Because the WTR regulations are intended to promote the health and safety of workers, there is a prohibition on payment in lieu of any part of the statutory annual leave entitlement. This is designed to avoid employers offering workers payment to forgo their minimum holiday entitlement.

The exception to this is when employment is terminated. A worker who leaves the job part way through the holiday year (or is sacked) is entitled to be paid in lieu of untaken statutory holiday entitlement (WTR regulation 14), the rate of pay for each day’s leave being calculated in accordance with the holiday pay rules.

Article 7 of the EWTD (2003/88) says the minimum period of paid annual leave may not be replaced by an allowance in lieu, except where the employment relationship is terminated. The right to be paid for unused holiday outstanding at the end of the employment is absolute, and any clause in a contract that seeks to deny it is void (Witley & District Men’s Club v Mackay EAT/151/00 [2001] IRLR 595).

Payment for unused contractual entitlement would only be due if the worker’s contract allowed for that, normally through an express contractual term, although in some circumstances the tribunal may imply a term (Janes Solicitors v Lamb-Simpson EAT/323/94).