Holidays and holiday pay 


All workers are entitled 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 right 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 this holiday entitlement are based on European law (the Working Time Directive). The extra 1.6 weeks are based on UK legislation. 


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, not just employees (see Chapter 2: Categories of worker). The genuinely self-employed do not qualify for holiday pay. 


Under regulation 13(9)(a), WTR, a worker’s statutory holiday entitlement of 5.6 weeks must be taken in the holiday year in which it accrues. A worker may also have a contractual right to extra holiday, in addition to the statutory entitlement under the WTR. Whether this extra holiday can be carried forward into the next holiday year will depend on their contract of employment. 


Workers who have been unable to take their statutory holiday due to sickness absence are in a special position as to carrying forward their holiday. This is looked at on page 122. 


Under EU law, the right to four weeks’ paid holiday is an important EU social right. Governments of member states are not allowed to cut down the right, or make it too difficult to enforce in a tribunal (KHS AG v Winfried Schulte [2011] EUECJ C-214/10). Its purpose is to protect health, safety and welfare through adequate rest (Pereda v Madrid Movilidad SA [2009] IRLR 959). 


The right has “direct effect” (Dominguez v Centre Informatique du Centre Ouest Atlantique [2012] IRLR 321). In other words, public sector workers can enforce the right to paid holiday under the Working Time Directive directly against their employer in the employment tribunal, regardless of the wording of the Working Time Regulations. In the case of private sector workers, the tribunal must implement the Directive by changing the wording of the regulations if necessary (NHS Leeds v Larner [2012] EWCA Civ 1034). 


Because the purpose of paid annual leave is to protect health and safety, no worker can be paid wages as a substitute for taking their statutory holiday (regulation 13(9)(b), WTR). The only exception is where the employment has ended. 


The right to be paid for unused statutory holiday at the end of employment is absolute. Any contract term that tries to remove it is void (Whitley & District Men’s Club v Mackay [2001] IRLR 595). 


In Podlasiak v Edinburgh Woollen Mill Limited ET/2701291/13, a tribunal ruled that a term in a zero hours contract that fixed a nominal payment of £1 for all holiday unused at the end of the contract was unlawful and a breach of the Working Time Directive. 


Even in cases of dismissal for gross misconduct, workers must be paid their accrued statutory holiday in full. 


Where employers provide extra holiday in addition to the 5.6-week annual statutory allocation, they can agree their own rules about the treatment of that extra holiday under the employment contract. An employee is only entitled to be paid for unused contractual holiday that is additional to the statutory minimum if the contract says so. Normally, there is an express contractual term, but sometimes the tribunal may imply a term (Janes Solicitors v Lamb Simpson EAT/323/94). 


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


There have been important case law developments on the calculation of holiday pay as a result of union-backed litigation in the European and national courts. These rulings only affect the four weeks of holiday under the Working Time Directive — not the extra 1.6 weeks available under UK law.


Following litigation supported by pilots union BALPA, it is now established under EU law that a worker must receive their “normal remuneration” when taking statutory holiday under the Working Time Directive. Holiday pay must be comparable to pay when working (Williams v British Airways [2011] EUECJ C-155/10). Any contract term to limit the four weeks of statutory holiday pay to basic pay only where normal pay includes other components is against the law as a result of this ruling.


The Williams ruling established that when on holiday, workers must be paid any component of their normal wages that is linked intrinsically to the performance of their contractual tasks. Otherwise, the health and safety purpose of the Directive would be thwarted, because workers would be deterred from taking holiday due to the prospect of income loss.


In another test case, this time supported by public services union UNISON, the ECJ confirmed that for workers whose pay is made up wholly or partly of results-based commission, holiday pay must include the commission that would have been earned if the worker had not been on holiday:


Lock was able to enforce his right to unpaid holiday pay as a claim for unlawful deduction of wages (British Gas Trading Limited v (1) Lock and (2) BIS [2016] UKEAT/0189/15/BA). Commenting on the latest ruling, UNISON General Secretary Dave Prentis celebrated Lock’s test case as a victory with implications “for thousands of workers in the UK and in Europe who for years have been denied a fair deal”.


An appeal by British Gas against the Lock ruling will be heard by the Court of Appeal on 11 July 2016, with a decision expected by the Autumn. Thousands of cases are likely to be stayed pending the outcome.


Another key case, this time backed by general union Unite, has established that holiday pay must include all regular overtime, both guaranteed and non-guaranteed, and all other payments that are linked to work, such as travel time payments, shift or weekend premium payments and anti-social-hours payments. These payments are all part of a worker’s “normal remuneration” that are “intrinsically linked” to the performance of tasks under the contract of employment, so they must be included (Bear Scotland Limited, Hertel (UK) Limited and Amec Group Limited v Fulton, Woods, Law and others [2014] UKEATS/0047/13/B1). 


A ruling of the Northern Ireland Court of Appeal has confirmed that voluntary overtime (i.e. overtime that the employer is not obliged to offer and which, if offered, the employee is not obliged to do) should also be included as long as it is worked regularly (Patterson v Castlereagh Borough Council [2015] NICA 47).


Despite employer fears, the Bear Scotland ruling did not result in large claims for back-payment of arrears of holiday pay. This is because the EAT ruled that a claim for unpaid statutory holiday pay would be out of time if there has been a gap of more than three months between successive underpayments. Even so, the ruling led directly to new regulations — the Deduction from Wages (Limitation) Regulations 2014 — limiting all claims for unpaid wages to a maximum of two years of back pay. As explained on page 103, the scope of the new regulations extends far beyond “holiday” pay to cover most claims for unpaid wages owed under the employment contract. 


The variable element of holiday pay should be worked out by averaging pay over the preceding 12-week period (May Gurney v Adshead & 95 others EAT/0150/06).


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 workers to be paid for their holiday at the time they take it (Robinson-Steele v RD Retail Services Ltd [2006] IRLR 386). 


The correct way to work out holiday pay is not to divide someone’s annual salary by 365 (a calendar year). Instead, the employer should divide the annual salary by the number of working days (Leisure Leagues v Maconnachie [2002] IRLR 600). This was confirmed by the EAT in Yarrow v Edwards Chartered Accountants [2007] UKEAT 0116/07/0806. 


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. 


Under the statutory scheme, workers who want to take leave must give notice of at least twice the length of the holiday requested. This requirement can be varied by the employment contract or through collective bargaining, but any conditions imposed for taking leave must not be unreasonable or arbitrary, or make it too difficult for the worker to take their leave (Lyons v Mitie Security UKEAT/0081/09, KHS AG v Winfried Schulte [2011] EUECJ C-214/10). 


An employer can ask for holiday to be deferred as long as they tell the employee in advance, giving notice which is at least as long as the holiday requested. Shorter notice can be given if a “relevant agreement” allows this. A contract term, for example, requiring employees to take holiday during their notice period, can be a “relevant agreement” (Industry & Commerce Maintenance v Briffa [2008] UKEAT/0215/08/CEA). 


If an employer refuses to pay for statutory holidays, a worker can bring a tribunal claim. There are tribunal fees (£160 issue fee and £230 hearing fee). Acas Early Conciliation applies. No claim can be brought in the employment tribunal without first submitting an Acas Early Conciliation Notification Form available from the Acas website. This step must be taken within the three-month time period for bringing the claim. See Chapter 13 for information on fees, “Help with Fees” and Acas Early Conciliation.