Holiday pay issues

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All full-time employees and workers in the UK have a statutory right to 5.6 weeks (28 days) paid annual leave. This entitlement includes public holidays. Often a contract of employment will provide for more days of paid annual leave each year.

Annual leave payments for the 5.6 weeks of statutory leave should be paid at a rate of a week’s pay. A week’s pay is calculated in accordance with the provisions of the Employment Rights Act 1996. The law in this area can be quite complex. Recent decisions of the European Court of Justice and the UK Courts mean that, as a general rule, all elements of your pay that are regularly earned during periods of work, including your basic wage, shift pay, commission and/or overtime, are to be included in this calculation in respect of at least 4 weeks of your annual leave entitlement. An employee should be no worse off financially when they take the 4 weeks of annual leave they are entitled to because of European law.

All too often, employers calculate holiday pay for the whole of an employee’s leave entitlement by using the employee’s basic pay only. If your employer is doing this, they are potentially acting unlawfully, and you could be entitled to compensation.

When does my holiday entitlement start and finish?

Your contract of employment should specify when your leave year starts and ends. This may be in line with the tax year (1 April – 31 March) or the calendar year (1 January – 31 December). If your contract of employment is silent on this issue, or you don’t have a written contract of employment, your leave year will start on the day that you started employment and end on the day before that date the following year. For example, if you started work on 8 June 2022, the leave year would start on this date and end on 7 June 2023.

My contract of employment has been terminated, but I haven’t taken all my annual leave, do I lose it?

No, you are entitled to receive payment in lieu of any accrued but untaken statutory annual leave entitlement if your contract is terminated part way through a leave year. For example, if your leave year started on 1 January, but your contract was terminated on 1 February, and you have not taken any annual leave during that time, you would receive equivalent to 2.3 days’ pay for accrued but untaken annual leave.

Can I carry annual leave from one leave year to the next?

You are not entitled to carry over any untaken statutory annual leave into the next leave year. Either you use it or you will lose it. The caveat to this is in circumstances where you have been prevented from taking annual leave because you have been on long term sickness leave, maternity leave or where your employment status has been incorrectly categorised as self-employed. In these cases, you are allowed to carry over any untaken annual leave into the next leave year. Your contract of employment may make separate provision for the carrying over of annual leave that is over and above your statutory entitlement.

My employer only calculates my annual leave using my basic hours, and does not take into account my commission, bonus or overtime. What do I do?

You should seek legal advice immediately as your employer may be acting unlawfully and you may be entitled to compensation. You may also want to address this by raising a grievance.

I think I have a claim for holiday pay, are there any deadlines I need to be aware of?

In short, yes. A claimant has three months minus one day from the date that the deduction was made to raise a claim in the Employment Tribunal. In certain circumstances it is possible to argue that there has been a series of deductions and seek compensation for any deductions that occurred within the period of two years prior to an Employment Tribunal claim being presented. However, it is still necessary for the claim to be made within 3 months (less a day) from the date of the last deduction. These deadlines are strict. If you are unsure, please seek legal advice from an experienced employment lawyer right away.

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