Holiday entitlement and pay

20th April 2018

Holiday entitlement and pay

It is important that people are able to take time off from their job to rest, recuperate and enjoy themselves, which is why workers are allowed a certain amount of time off every year. To make sure everyone is treated fairly, there is a legal minimum amount of annual leave that workers must be given.

Remember that your employment contract may give you more rights than the bare minimum under the law, and if it does then your employer must comply with what it says in the contract. Your contract cannot, however, take away from your employment rights – for example, your employer may offer you more time off than the legal minimum, but they cannot offer you less.

Annual leave entitlement

Most workers have the right to take a certain amount of paid holiday every year. This is known as statutory annual leave and usually amounts to a minimum of 5.6 weeks of time off per year. Your employer may choose to give you additional time off, but they must give you at least this minimum amount.

The number of actual days you will be entitled to take off depends on how many days you work each week. If you are employed on a full-time basis (working 5 days a week), you must get 28 days’ annual leave each year.

If you work less than this, you can figure out how many days off you should receive by multiplying the amount of days you work by 5.6. However, if you work more than 5 days a week, you will still only be entitled to 28 days’ statutory leave.

If you are taking maternity, paternity or adoption leave, or are off work sick, you are still considered to be “working” for the purpose of calculating your holiday entitlement.

Remember that the above only describes the minimum amount of annual leave which your employer must give you. Your employment contract may entitle you to take more time off than this, though different rules may apply to any extra leave you are given.

Bank holidays

There are usually eight public holidays each year in England and Wales, known as bank holidays. Many businesses close down on these days and their workers are required to take the day off. Often this will count towards your annual leave entitlement, so even if you are entitled to 28 days’ holiday each year, this may be broken up into 8 days of time off for bank holidays and 20 days of bookable leave.

Your employer does not have to give you bank holidays off, and you are not entitled to be paid more if you have to work through them.

Sometimes, extra bank holidays may be added to the calendar – for example, in 2012 there was an additional bank holiday to celebrate the Queen’s Diamond Jubilee. Whether or not you are entitled to take these days off will likely depend on your employment contract.

Your contract may say that you are entitled to 8 bank holidays each year, or refer to “the usual” bank holidays. In this case, there is no guarantee that you would be allowed to make use of an additional bank holiday.

On the other hand, it may simply state in your contract that you get bank holidays off – this would mean that you are entitled to any additional bank holidays which may take place.

You should bear in mind however that your employer is within their rights to count this extra bank holiday as a day off and take it off your total amount of remaining leave.

Sickness during annual leave

If you have taken annual leave but become ill while you are off work, you can change your time off to sick leave. This means that you will not have to waste a portion of your annual leave on recovering from an illness, and you will receive Statutory Sick Pay during this period instead (if you qualify for it).

This also works the other way around. If your employer allows it, you may be able to take sick leave as paid holiday. This can be useful if, for example, you are not entitled to receive sick pay but do not want to lose money while off work.

See our information on sick leave for more information about sick pay and time off work for illness.

Annual leave years

When it comes to receiving your entitlement of annual leave, your workplace will have a holiday year which determines when you get a new allotment of annual leave and the date by which you must take any existing holiday days. Your employer can decide the date on which a new holiday year begins, but if they do not specify one then by default it will begin on the 1st of October.

If you start a new job partway through a holiday year, your employer only needs to give you a percentage of the total annual entitlement based on how much of the holiday year you will be working. They may also choose to divide up your holiday when you start the job so that you get a certain amount of holiday entitlement each month (adding up to your total entitlement).

Your employer may allow you to carry over a certain amount of annual leave into the next holiday year, though they do not have to. Your contract should state if you are permitted to save some of your annual leave for next year.

If you work full-time and get 28 days’ annual leave, the maximum you are allowed to carry over is 8 days of annual leave. If you get more annual leave than this, you may be able to carry over more days, at your employer’s discretion.

One exception to these rules is if you have been unable to take your annual leave because you have been off work, for example because you have been on sickness, maternity or parental leave. In these cases, your employer must allow you to carry over 20 days’ leave (for full-time workers) into the next year.

Bear in mind that this only applies if you were off for the entire year, or were off work at the end of the holiday year and were unable to use all of your annual leave as a result. If you return to work before the end of the holiday year and have enough time to take your annual leave, if you choose not to do so then you may lose it.

Booking annual leave

When booking annual leave, the usual rule is to give twice as much notice to your employer as the amount of holiday you plan to take. For example, if you want to take a week off, you would have to give 2 weeks’ notice of this. However, there may be different rules in your workplace; if so it should be stated in your contract.

Your employer can deny your request to take annual leave on a particular date, but they must give you as much notice of this as the amount of time you have asked for. For example, if you asked for a week off, they have to give at least a week’s notice that your request has been denied.

Even though they can deny a request for leave on a particular date, they cannot say that you are not allowed to take your leave at all.

Forced leave

Your employer is legally allowed to decide when you have to take your annual leave. Bank holidays are the most obvious example of this, but you may also be told that you must take time off because your workplace is closed for other reasons or because certain times of the year are quiet periods for the business.

It is quite common, for instance, for businesses to close down over the Christmas period for longer than the statutory bank holidays, so you may be forced to use up some amount of your leave over this period.

Your employer must give notice if they want you to take leave at a certain time. The rule is that for every day of leave you are expected to take, they must give you two days’ notice. So, if you are being told you must use five days of leave, they have to give ten days’ notice of this.

Your employer should treat employees fairly when making decisions on forced annual leave, and cannot breach the terms of your contract or act in a discriminatory manner when doing so.

Holiday pay

When you take your statutory annual leave, you must be paid for this in line with your normal wages. If you work a set number of hours and receive the same amount of pay on a regular basis, your weekly holiday pay should be the same as you would earn in a week of work.

It can be difficult to work out how much holiday pay you should receive if you do not always work the same number of hours in a week, are paid at varying rates, or both.

In these cases, you should be paid based on your average hours or pay. So, if you work for a fixed wage but your hours are different each week, your holiday pay should be calculated by taking the average number of hours you work and multiplying this by your set hourly pay. If your pay varies, you should do likewise in figuring out an average.

The averages here should be based on the previous 12 weeks for which you were paid. If you were not paid at all for a particular week, this week is not included for the purposes of calculating your holiday pay.

Annual leave when ending a job

Leaving a job can complicate the issue of annual leave for a number of reasons. If you have annual leave left over for that holiday year, then you should be able to take that time off during your notice period or arrange with your employer to be paid for the days you did not take instead (“payment in lieu”).

This is the only situation in which your employer can offer to pay you extra instead of letting you take time off, and they must do so if you have any untaken holiday entitlement when leaving your job.

If your employer offers more than the standard annual leave entitlement, they can make a separate decision on what should be done about any additional leave beyond the minimum requirement.

You may have less entitlement to annual leave than expected if you leave before the holiday year is over, however. For example, if you leave halfway through a holiday year, you will only have half of your usual amount of leave. This can cause problems if you have already used up more than half of the holiday you expected to have.

It is unlawful for your employer to deduct money from your final pay if you have taken too much leave unless you have a prior agreement in writing. The rules about what your employer will do in this situation should be explained in your contract or employee handbook.

Recent EAT ruling

A recent ruling by the Employment Appeal Tribunal (EAT) could have an effect on holiday pay in the future. The case dealt with workers who regularly worked more than their contracted hours, and the EAT decided that in future people should be given holiday pay in line with their usual earnings, as opposed to merely receiving pay based on the hours their contract said they worked.

This is because there was the potential for employers to take advantage of their workers by only guaranteeing them a small amount of contracted hours but expecting them to regularly work beyond these, meaning their holiday pay, based on the contracted hours, would work out to be far less than their usual pay.

The EAT said that this would have to be dealt with in order to prevent workers being discouraged from using the annual leave to which they were entitled.

However, it is not yet clear how this will be implemented into the law and the ruling may be appealed against in the future.

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