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Holiday entitlement and pay

Overview
This section concentrates on holiday entitlement and holiday pay under employment legislation and also the statutory rights of employees and workers under the Working Time (Amendment) Regulations 2007, which came into effect on 1 April 2009. Both employees and workers are covered by this legislation.

On 8 January 2015 the Deduction from Wages (Limitation) Regulations 2014 came into force limiting claims for back pay of incorrectly calculated holiday pay to two years following the EAT decision in Bear Scotland v Fulton. The regulations apply to claims for holiday back pay presented to a tribunal on or after 1 July 2015 (see 'In-depth' section regarding the impact of the regulations on holiday entitlement above 20 days per year).

Key points

  • The minimum statutory requirement for a full time employee is 28 days or 5.6 weeks including public holidays
  • Full-time workers annual holiday entitlement normally accrues at 2.33 days per month from the first day of employment
  • Part-time workers are also entitled to a minimum of 5.6 weeks of paid holiday each year, calculated on a pro-rata basis, according to the hours they work.
  • Contracts of employment may stipulate whether all public holidays or only particular bank holidays are included in their annual entitlement
  • Taking unauthorised annual holiday may lead to disciplinary action being taken by the employer
  • In addition to the statutory minimum holiday entitlement an organisation may adopt the use of a time-in-lieu or flexi-time system and/or the use of unpaid holiday entitlement in addition to paid holiday entitlement
  • The law has changed significantly in respect of the calculation of holiday pay so that now regular overtime and commission payments may need to be included (see 'In-depth' section).

Recent developments

Government consults on introducing single body to enforce employment rights

Following a proposal contained in the Good Work Plan, the Department for Business, Energy and Industrial Strategy (BEIS) has released a consultation examining whether a single enforcement body should be introduced for employment rights and obligations.

A single enforcement body will look to carry out enforcement which is currently undertaken by others, including holiday pay, the minimum wage (currently enforced by HMRC) and agency worker rights (currently enforced by the Employment Agency Standards Inspectorate).

The consultation asks interested parties to submit their views on the remit and enforcement powers of this body, as well as asking whether it should carry out enforcement of statutory sick pay and unpaid tribunal awards. More information can be found in our news article.

Voluntary overtime to be included in holiday pay, rules Court of Appeal

The highest decision on including voluntary overtime payments in holiday pay calculation has been handed down by the Court of Appeal. In East of England Ambulance NHS Trust v Flowers, it was confirmed that voluntary overtime which is 'sufficiently regular and settled' will be classed as normal remuneration, so should be taken into account for holiday pay calculations.

Whether voluntary overtime is sufficiently regular and settled, will be a question that is determined on the facts of each case.

Changes to holiday pay calculations from April 2020

An independent review into modern ways of working, and the calculation of holiday pay for flexible workers, was carried out by Matthew Taylor and resulted in the Good Work Review which was published in July 2017.

Following a consultation on this matter, the government’s ‘Good Work Plan’ released in December 2018 has confirmed that legislation will be introduced to increase the holiday pay calculation reference period. From 6 April 2020, the reference period will be extended from 12 weeks to 52 weeks, to allow a fairer approach to holiday pay when workers carry out flexible working hours.