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Holidays and holiday pay
[ch 4: pages 126-128]Rights to holiday and holiday pay are largely based on EU law.
All workers are currently entitled to a minimum of 5.6 weeks’ paid statutory holiday a year (equivalent to 28 days for someone working a five-day week) under the Working Time Regulations (WTR). Four weeks are based on the Working Time Directive (WTD) while the extra 1.6 weeks are based on UK legislation enacted following union campaigning (Working Time (Amendment) Regulations 2007). 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 (those in business on their own account, contracting freely with their own customers and clients) do not qualify.
In general, the four weeks of statutory holiday under the WTD must be taken in the holiday year in which the holiday accrues. It cannot be carried forward into the next holiday year (regulation 13(9), WTR 98). However, there are important exceptions to this general rule, as follows: carrying forward of holiday is allowed where the worker has been unable to take their holiday due to sickness (see page 131), maternity leave (see page 315); or because the employer would not have paid for the leave had it been taken at the correct time (see page 127).
The extra 1.6 weeks of holiday available under UK law can be carried forward into the next holiday year if a “relevant agreement” allows this. This is normally a term in the employment contract or a written holiday procedure (regulation 13A, Working Time (Amendment) Regulations 2007). Without a relevant agreement, there is no right to carry over this extra leave.
Some workers have a contractual right to extra holiday on top of the statutory 5.6 week entitlement. The rules governing this extra (contractual) holiday will depend on the contract of employment. An employee is only entitled to be paid for unused contractual holiday if the contract says so. Normally, there is an express contractual term, but the tribunal may imply a term (Janes Solicitors v Lamb Simpson EAT/323/94). See Chapter 3, page 79.
EU law says that the right to four weeks’ paid holiday is an important EU social right which member states are not allowed to cut down or limit, or make it too hard to enforce (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).
Because of this health and safety purpose, the law does not allow workers to be paid wages instead of taking statutory holiday (reg 13(9)(b), WTR, reg 13A(6), Working Time (Amendment) Regulations 2007). Pay in lieu is only allowed when the employment is terminated.
The right to be paid for any unused statutory holiday at the end of employment is absolute. Even employees dismissed for gross misconduct must be paid their unused statutory holiday in full. Any contract term that tries to remove it is void (Witley & District Men’s Club v Mackay [2001] IRLR 595). In Podlasiak v Edinburgh Woollen Mill Limited ET/2701291/13, a tribunal confirmed that a term in a zero hours contract that attempted to fix a nominal payment of £1 for unused holiday at the end of the contract was a breach of the Directive.
In 2017, the ECJ delivered an important ruling on statutory holiday pay, with significant implications, especially for workers mis-classified as “self-employed”, whether deliberately or otherwise (see Chapter 2, page 38). Here it is:
Mr King’s employer treated him as “self-employed” for 13 years, during which time he was paid commission only. If he took holiday, it was unpaid. When King retired, he brought a tribunal claim for his annual leave for the whole 13-years, both holiday taken but unpaid and holiday not taken at all. King’s employer had never offered paid holiday and King had never requested it. An employment tribunal ruled that King was a worker entitled to annual leave.
Eventually, the case reached the ECJ. The ECJ ruled that under the Working Time Directive, King had a right to his statutory paid holiday for the entire period spent working for the employer, that is, four weeks for each of the 13 years. The ECJ started from the position that every worker is entitled to four weeks’ paid holiday and that a worker who fears that if he takes holiday he will not be paid for it will be deterred from taking his holiday and will not benefit from a period of relaxation and leisure. King could claim for his holiday even though he did not ask to take it, and for holiday taken but without pay.
Since King was prevented by reasons beyond his control from taking his leave in each holiday year, the ECJ said he could recover the entire 13 years of leave. It was the employer’s responsibility to understand and implement workers’ rights correctly, said the ECJ, and King’s employer had benefited from 13 years of uninterrupted service without paid holiday. “An employer that does not allow a worker to exercise his right to paid annual leave must bear the consequences”. Any other conclusion, ruled the ECJ, would ”unjustly enrich” the employer and undermine the Directive’s health and safety purpose.
The ECJ said that King's position was different from that of a worker unable to take leave due to sickness (where there is a legitimate balance to strike between a worker’s right to rest and relaxation and an employer’s need to manage during long periods of absence). No such considerations apply if a worker loses out on paid holiday due to the employer’s fault. National laws cannot prevent a worker accumulating untaken holiday over consecutive reference periods where the employer has refused to pay for that leave, whether or not the worker asked to take their holiday.
King v The Sash Window Workshop [2017] C-214/16
This strong ruling significantly raised the stakes for employers, especially employers that have built their business using a model of false self-employment (see Chapter 2, page 38). The ruling does not limit holiday pay claims to two years, bringing EU law into conflict with the government’s Deduction from Wages (Limitation) Regulations 2014 (see page 106). It also allows claims by workers who did not take their holiday while working. The ruling only affects the four weeks of holiday entitlement under the Working Time Directive and not the extra 1.6 weeks’ statutory holiday under national law.