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Holiday entitlement and pay

Overview
Javaid, Makbool - Simons Muirhead and Burton
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 annual leave entitlement 5.6 weeks. The maximum statutory entitlement is 28 days, based on a 5 day working week
  • 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. There is no obligation to give employees bank holidays off, however if the business is closed on those days annual leave will be needed to cover them
  • 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

Response to consultation on changes to holiday calculations and retained EU law announced

10 November 2023

On 8 November 2023, the government published its response to two key consultations that took place earlier in the year. This set out the governments plans for new and changed legislation, including:

  • Making rolled up holiday pay lawful

  • Introducing the 12.07% accrual method for the calculation of holiday entitlement into law

  • Removing emergency covid rules allowing for certain annual leave carry over

  • Restating retained EU case law on carry over of annual leave during sickness or absence for family friendly leave

  • Introducing a method for calculating annual leave accrual for irregular hours workers and part year workers where they have been absent due to sickness or family friendly leave

  • Clarification in law of what is meant by “normal pay” for the purposes of holiday pay calculations

     
Change of approach to law derived from the EU

The government has reversed its position on the law derived from the EU that remains in UK law. Instead of repealing everything that was not actively maintained by 31 December 2023, these pieces of law will remain in force. The government will now go through a process of reviewing these laws, but without the above deadline. One of the first areas where there will be changes is working time and holidays. This includes: 

  • Reinstating rolled up holiday pay. 

  • Combining the four weeks annual leave required under the working time directive, and the 1.6 weeks given additionally by the working time regulations, into one.