Amy Paxton, senior employment consultant at Croner, explains the law surrounding holiday leave and pay.

The Employment Tribunal recently awarded £4,000 to a part-time chip shop worker after the owner denied her holiday pay. The 18-year old girl had been employed for over four years and during that time had not received a contract of employment either. The girl should have received holiday pay after she turned 16 but when she asked for this, the owner laughed it off.

While this case seems extreme it does highlight the need for employers to be aware of what their employees are entitled to.

The law

The Working Time Regulations provide for paid holiday each year for all workers. All workers are covered, irrespective of the hours that they work and whether or not they are referred to as “employees”. Even self-employed workers are covered if they undertake to perform work personally and the relationship is genuinely not one of a client or customer on the one part and a profession or business undertaking on the other.

The right to holidays

The regulations give workers the right to 5.6 weeks’ paid holiday (28 days for someone who works five days a week) and includes all bank/public holidays.

Workers have the right to holiday from their first day of employment. The accrual rate for new employees is given at the rate of one-twelfth of the statutory entitlement, rounded up to the nearest half day, on the first day of each month of the first year. The holiday year for new employees may be fixed by a relevant agreement. If not, it runs from the employees’ start date and each subsequent anniversary. Any holiday entitlement from the original 5.6 weeks’ leave must be taken within the holiday year in question otherwise it will be forfeited.  There is, however, the possibility to carry over any additional leave (extra holiday leave agreed by the employer over the statutory minimum) from one holiday year to the next, if it is specified in a relevant agreement. If a worker leaves having taken fewer holidays than he or she is entitled to, he or she should be paid in lieu of the untaken holiday. This does not need to be rounded up.

If a worker leaves having taken more than he or she has accrued, a relevant agreement may provide for a deduction from pay in lieu of the excess holiday. In any calculation of holiday entitlement during the first year, all fractions are to be rounded up to the nearest half day, except on termination. Fractions of a day’s holiday at any time apart from in the first year of employment do not have to be rounded up.

Notification of holidays

If an employee wants to take a holiday they must give notice in writing of his or her intention to take any holiday. The notice required is equivalent to twice the length of time of the holiday requested. If for any reason you are not able to let the employee take the time off you must tell the employee in writing within a further time period equivalent to the length of time of the holiday request. You may decide that you want to fix some or all of the holidays. If you do you will need to give notice in writing to each worker, which should be equivalent to twice the length of time of the holiday to be fixed.

Holiday pay

Payment for holidays should be the same rate as worker’s normal pay and calculated on the basis of the worker’s normal hours of work. If there are no normal hours of work or the rate of pay varies, holiday pay is calculated on the basis of the average pay received by the worker in the previous 12 weeks. Additional holidays If you decide to offer more days than the statutory minimum, you are free to make your own arrangements for the contractual holiday extra to the statutory minimum.

A relevant agreement will need to be created. This can either be a workforce agreement, a collective agreement with a recognised trade union, or any other agreement in writing between you and your workers which is legally enforceable (eg a written employment contract).

Part-time, casual and self-employed workers

Employers cannot exclude part-time employees, casual staff and the self-employed from the minimum holiday entitlement described above. As in the chip shop case, complaints about holiday entitlement are made to an employment tribunal. Employees can make claims of automatic unfair dismissal if they are dismissed for asserting their rights under the Working Time Regulations. The usual two years’ service required for an employee to claim unfair dismissal does not apply for this type of claim.

Employers must ensure that they have in place relevant agreements covering the holiday year, deduction of excess holiday pay entitlement upon termination and notification of holidays and refusal of holidays, or the default provisions in the regulations will apply. If there is no relevant agreement on the holiday year, the employer may well be faced in time with each employee on a different holiday year. Where current holiday rules operate in any way such as to deny a worker any entitlement under the regulations, the regulations will prevail. An employer cannot argue that overall its scheme is more beneficial to the worker.

Further reading on the law surrounding holiday leave and pay:

• Are employees entitled to holiday pay?

See also: Holiday pay for sick workers worries employers