Holidays

All workers have the right to a minimum of 5.6 weeks’ paid holiday a year (equivalent to 28 days for someone who works a five-day week) under the Working Time Regulations (WTR), The original entitlement to four weeks holiday was increased to 4.8 weeks in October 2007 and from 4.8 to 5.6 weeks in April 2009 as a result of union campaigning. Four weeks of the holiday entitlement are based on European law (the Working Time Directive), whereas the extra 1.6 weeks are based on UK legislation. The government has been consulting (as part of its Modern Workplaces consultation) on allowing employees and employers the possibility of agreeing to “buy out” the extra leave that goes beyond the requirements of the Directive but its response to this aspect of the consultation has not yet been published.

There is a ready reckoner for calculating holiday entitlement at: www.gov.uk/calculate-your-holiday-entitlement

The right to paid annual leave is available to all workers and not just employees (see Chapter 2: Categories of worker). Under the statutory scheme, holidays must be taken in the year in which they accrue unless the employment contract allows untaken leave to be carried forward into the next holiday year. The position is more complicated where a worker has been unable to take holiday due to sickness absence.

The right to paid holidays is an important EU social law from which there can be “no derogation” (KHS AG v Winfried Schulte Case C-214/10). In other words, national law is not allowed to cut down the statutory right to take holiday insofar as it is based on EU law, or make it too difficult for the worker to enforce the right in a tribunal. The basis of the right is that workers’ health and safety must be protected through adequate rest.

Because the right to paid annual leave is intended to protect workers’ health and safety, a worker is not allowed to be paid in lieu of taking statutory holidays, except where the employment has ended, leaving the worker with outstanding unused holiday. 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).

A worker is only entitled to be paid in lieu of unused contractual (as opposed to statutory) holiday entitlement if the contract allows for this. Normally this takes the form of an express contractual term, although in some circumstances the tribunal may imply a term (Janes Solicitors v Lamb Simpson EAT/323/94).

Although the health and safety purpose of statutory holiday is to take rest (Pereda v Madrid Movilidad SA [2009] IRLR 959), the Supreme Court has confirmed that the Working Time Directive is not concerned with the “quality” of rest periods. “‘Rest period’ simply means any period which is not working time” (Russell v Transocean International Resources Limited [2011] UKSC 57).

Pay during holidays is calculated in the same way as a normal week’s pay (sections 221 to 224 of the ERA 96).

Overtime pay is only included in the calculation of holiday pay if the employer is contractually obliged to provide it (Bamsey v Albion Engineering ([2004] IRLR 457)). The same normally applies to commission payments. Where pay depends on output (for example, where there is a variable contractual bonus linked to productivity), holiday pay should be calculated taking the bonus into account averaging the pay over the preceding 12-week period (May Gurney v Adshead & 95 others EAT/0150/06).

The rules on calculating holiday pay were examined in the following successful ECJ case supported by pilots union BALPA:

Holiday rights accrue on a monthly basis. In the first year, a worker is entitled to a twelfth of the statutory annual leave entitlement for every month worked. The amount of time that can be taken at any one time within the first year of work can be rounded up to the nearest half a day. For example, someone working five days a week who has worked for two months would be entitled to take three-and-a-third days, and so could take three-and-a-half days’ leave.

Under the statutory scheme, workers wanting to take leave must give notice of at least twice the length of the holiday requested. This requirement can be varied by the terms of an employment contract or collective agreement, but the conditions imposed by the employer for taking leave must not be “unreasonable, arbitrary or capricious” (Lyons v Mitie Security UKEAT/0081/09).

The employer is allowed to ask for the leave to be deferred, as long as the employer tells the employee in advance, giving notice which is at least as long as the leave requested. Shorter notice can be given where there is a “relevant agreement”. A term in the employment contract entitling the employer to require the employee to take holiday during his notice period can be a “relevant agreement” for this purpose (Industry & Commerce Maintenance v Briffa UKEAT/0215/08/CEA).

It is unlawful to pay holiday pay as part of the hourly rate of pay. The practice, known as rolled-up holiday pay, breaches the Working Time Directive which requires that workers are paid for their holiday at the time that they take it (Robinson-Steele v RD Retail Services Ltd, Clarke v Frank Staddon Ltd and Caulfield & others v Hanson Clay Products Ltd (formerly Marshalls Clay) C-131/04 and C257/04 ([2006] IRLR 386)).

In Leisure Leagues v Maconnachie ([2002] IRLR 600), the EAT held that the amount of a day’s holiday pay should be calculated by dividing the annual salary by the number of days actually worked (in that case, 233) rather than by 365, which was the previous practice. This was to take into account good industrial practice and the introduction of the Working Time Regulations. This was confirmed by the EAT in Yarrow v Edwards Chartered Accountants (UKEAT/0116/07).

If an employer refuses to pay for statutory holidays, a worker can bring a claim in an employment tribunal. A worker can choose between bringing a claim for breach of the WTR or claiming outstanding holiday pay as an unlawful deduction from wages (HM Revenue and Customs v Stringer and others [2009] IRLR 677).

The advantage of a claim for unlawful deduction from wages is that a continuing series of deductions need only be the subject of one claim (rather than a claim for each time pay was docked).