Holiday pay – again!

With one month to go in the year and many organisations using the calendar year as their leave year, we’re taking this opportunity to remind clients of what they need to know about holidays and holiday pay.

There have been further high profile cases on holiday pay in recent weeks – one involving the Police Service in Northern Ireland and another from the European Court of Justice.

So, what do employers need to know about holidays and holiday pay? Here are the main points:-

1. All employees in the UK are entitled to 5.6 weeks’ paid annual leave per year

2. Holiday pay should be based on average earnings including commission and regular overtime, not just basic pay. There are some issues to be resolved in the case law in this area regarding whether there is a distinction to be made between the 4 weeks’ leave granted by the European Directive and the additional 1.6 weeks granted under UK law. However, it seems to us that it would be prudent for employers to be paying average earnings to employees for all periods of annual leave throughout the year

3. Employers must demonstrate that employees have had the opportunity to take their full annual leave allocation throughout the leave year. This will be significant for any employer who operates a “use it or lose it” approach to annual leave

4. Annual leave continues to accrue during long-term sick leave

5. Annual leave continues to accrue during an employee’s notice period. If an employer wants an employee serving notice to use up annual leave during the notice period rather than be paid in lieu of accrued leave on termination of employment, the employer must give notice to the employee of the requirement to take annual leave. The notice must be twice as long as the period of annual leave to be taken.

Holiday pay is a complex area. The purpose of this article is not to go into any particular aspect in detail but to highlight the main areas employers need to be considering. For advice in relation to any of the issues raised in this article or anything else to do with employment law, please contact us.


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