Annual leave

Background

Under the Work­ing Time Reg­u­la­tions 1998 (as amend­ed), work­ers are enti­tled to paid statu­to­ry annu­al leave of 5.6 weeks (28 days if the employ­ee works five days a week). This basic enti­tle­ment is inclu­sive of bank hol­i­days. This annu­al leave enti­tle­ment is now clos­er to that of work­ers in oth­er Euro­pean coun­tries where the hol­i­day allowance is typ­i­cal­ly more gen­er­ous. Work­ers in Ire­land are enti­tled to 30 days; the high­est min­i­mum enti­tle­ment is in Andor­ra at 45 days.

Payment for annual leave

A work­er is enti­tled to be paid in respect of any peri­od of annu­al leave for which they are enti­tled at a rate of one week’s pay for each week’s leave. For employ­ees with nor­mal work­ing hours, a week’s pay is the pay due for the basic hours the employ­ee is con­tract­ed to work. Any reg­u­lar con­trac­tu­al bonus­es or allowances (except expense allowances) which do not vary with the amount of work done are also includ­ed.

Where a work­er has vari­able pay, a week’s pay is based on their aver­age week­ly earn­ings. For leave years that begin before 1 April 2024, the aver­age is cal­cu­lat­ed from the pre­vi­ous 52 weeks, dis­count­ing any weeks where no pay was received. For leave years begin­ning on or after 1 April 2024 there is a new accru­al method and hol­i­day enti­tle­ment for these work­ers will be cal­cu­lat­ed as 12.07% of actu­al hours worked in a pay peri­od.

When cal­cu­lat­ing a week’s pay, some addi­tion­al ele­ments may need con­sid­er­ing in addi­tion to base pay.

Com­mis­sion has pre­vi­ous­ly not been includ­ed in the cal­cu­la­tion of hol­i­day pay, how­ev­er, fol­low­ing a rul­ing by the Euro­pean Court of Jus­tice (ECJ) which was upheld by the Court of Appeal, when com­mis­sion is relat­ed to the num­ber of sales made whilst at work, it should also be includ­ed in the cal­cu­la­tion of hol­i­day pay. There was a fur­ther appeal to the Supreme Court, which was not grant­ed and employ­ers will now be required to com­ply with this rul­ing.

Guar­an­teed and non-guar­an­teed over­time should also be includ­ed along with reg­u­lar vol­un­tary over­time pay­ments. The dif­fer­ence between non-guar­an­teed and vol­un­tary over­time is that the employ­ee is oblig­ed to do non-guar­an­teed over­time if it is offered, but can turn down vol­un­tary over­time. Where the vol­un­tary over­time is irreg­u­lar or ad hoc it does not need to be includ­ed unless it extends for a suf­fi­cient peri­od of time on a reg­u­lar and/or recur­ring basis. This includes over­time reg­u­lar­ly worked at cer­tain points in the year, for exam­ple at Christ­mas, as well as fre­quent­ly worked over­time through­out the year.

These addi­tion­al ele­ments need only be includ­ed for the four weeks of statu­to­ry leave required by Euro­pean law which is low­er than the UK min­i­mum of 5.6 weeks, it can be exclud­ed for any addi­tion­al days above this.

Under the Reg­u­la­tions any statu­to­ry annu­al leave may not be replaced by a pay­ment in lieu, except on ter­mi­na­tion of employ­ment. In such cas­es, a pay­ment can be made for any untak­en leave in the leave year that ter­mi­na­tion occurs. Pay­ment may also be due for any car­ried over leave because of maternity/adoption leave or sick­ness.

Requesting leave

Employ­ees should be allowed to choose when they take some of their leave although many employ­ers do set cer­tain con­di­tions, for exam­ple that only a cer­tain num­ber of work­ers may take leave at the same time or that work­ers may not take more than a cer­tain num­ber of con­sec­u­tive work­ing days off in one go.

It is com­mon for employ­ers to have a pro­ce­dure in place for these instances and it should include the pro­ce­dure for noti­fi­ca­tion. If this is exclud­ed, then the legal posi­tion is that an employ­ee request­ing a peri­od of leave must give notice of at least twice the peri­od of leave to his or her employ­er. A sim­i­lar arrange­ment of notice must be giv­en by the employ­er if they are request­ing the employ­ee to take leave at spe­cif­ic times.

First year of employment

Work­ers accrue their annu­al leave enti­tle­ment on a pro rata basis dur­ing their first year of employ­ment. This is cal­cu­lat­ed in rela­tion to the pro­por­tion of the employ­ment year worked. There­fore, the annu­al leave enti­tle­ment will accrue over the course of the worker’s first year of employ­ment at the rate of 1/12 of the annu­al enti­tle­ment, start­ing on the first day of each month. If the cal­cu­la­tion does not result in an exact num­ber of days then the fig­ure will be round­ed up to the near­est half day.

Annual leave and part time employees

Under the Reg­u­la­tions, cur­rent­ly, hol­i­day enti­tle­ment for part-time work­ers is 5.6 weeks, pro-rat­ed based on hours worked.

From 1 April 2024, the cal­cu­la­tion will be done using the 12.07% accru­al method, which will include an adjust­ment for bank hol­i­days based on actu­al hours worked, mak­ing it eas­i­er for employ­ers to cal­cu­late and ensure com­pli­ance.

The ECJ ruled that it is unlaw­ful for employ­ers to roll up work­ers’ annu­al leave pay­ments — how­ev­er, for leave years begin­ning on or after 1 April 2024, employ­ers can use rolled-up hol­i­day pay for irreg­u­lar-hours or part-year work­ers as opposed to pay­ing hol­i­day pay when a work­er actu­al­ly takes annu­al leave.

Contractual annual leave entitlement

An employ­er can increase a worker’s statu­to­ry annu­al leave enti­tle­ment via a con­trac­tu­al arrange­ment. In such cas­es any unused addi­tion­al annu­al leave may be car­ried over to the next leave year. This is often a mat­ter of employ­er dis­cre­tion and will depend on the terms of the con­tract.

Annual leave accrual during maternity and adoption leave

An employ­ee con­tin­ues to accrue their statu­to­ry annu­al leave enti­tle­ment of 5.6 weeks and any addi­tion­al con­trac­tu­al annu­al leave enti­tle­ment through­out both ordi­nary mater­ni­ty leave (OML) and addi­tion­al mater­ni­ty leave (AML).

Sickness during holiday

Employ­ees are now enti­tled to reclas­si­fy statu­to­ry hol­i­day as sick leave if they fall ill whilst on pre­arranged statu­to­ry hol­i­day. This means that they are enti­tled to take the statu­to­ry hol­i­day they have missed lat­er. If they are unable to take the rest of their statu­to­ry hol­i­day that hol­i­day year, they can car­ry it over to the next hol­i­day year. If you offer more than 5.6 weeks hol­i­day a year, you do not have to allow an employ­ee to re-clas­si­fy any addi­tion­al (con­trac­tu­al) hol­i­day as sick­ness absence. How­ev­er, you will have to ensure that they can take their full statu­to­ry hol­i­day at oth­er times. If you pay con­trac­tu­al sick pay, you can min­imise the scope for abuse by mak­ing con­trac­tu­al sick pay in these cir­cum­stances con­tin­gent on the employ­ee noti­fy­ing you on the first day of ill­ness that they are ill and, pos­si­bly, requir­ing them to pro­vide a med­ical cer­tifi­cate from the first day of their ill­ness.

Employ­ees who are on sick leave can ask their employ­er to re-clas­si­fy their absence as statu­to­ry hol­i­day in order to receive hol­i­day pay. If an employ­ee on sick leave does not want to take their out­stand­ing statu­to­ry hol­i­day before your cur­rent leave year ends, they should be per­mit­ted to car­ry it over into the next leave year. Employ­ees return­ing from sick leave can take their statu­to­ry hol­i­day enti­tle­ment for the cur­rent year on their return but, if there is insuf­fi­cient time for them to take it, they should be allowed to car­ry it for­ward to the next leave year.

Recovery of overpayment of holiday

Employ­ee con­tracts should make clear that if an employ­ee takes more hol­i­day than he or she is enti­tled to dur­ing the course of a leave year, the com­pa­ny will be enti­tled to recov­er the over­pay­ment of hol­i­day pay by deduct­ing it from the employ­ee’s wages or salary. It is advis­able for the com­pa­ny to con­sult with the employ­ee before mak­ing the deduc­tion.