ACAS guide to holidays and holiday pay
What restrictions may an employer place on the taking of holidays? Do employees have the right to paid leave on public holidays? How is a part-time worker's holiday entitlement calculated? How is a part-time worker's holiday entitlement calculated? These questions and more are answered in a new Acas document outlining its advice on holiday entitlement.
What does the law say about holiday
entitlement?
The Working Time Regulations 1998 set down the minimum
annual leave provisions for workers although some employers may provide more
generous contractual holidays.
Under the Working Time Regulations, workers (including
part-timers and most agency and freelance workers) have the right to:
The provisions in the Regulations on holidays and holiday
pay do not, at present, apply to:
From 1 August 2004 junior doctors will be entitled to the
minimum statutory entitlement of four weeks paid holiday.
Schedule 2 to the regulations makes special provisions for
annual leave in relation to agricultural workers. More information is available
from the Agricultural Wages Helpline on 0845 000 0134
Where are entitlements to holidays
and holiday pay recorded?
Details of holidays and holiday pay entitlement can be found
in:
The written statement is required by law and must be given
to employees by the employer no later than two months after the start of
employment.
The document should contain sufficient detail to enable the
employee's entitlement to be precisely calculated, including any entitlement to
accrued holiday pay on the termination of employment.
What are public holidays?
Generally, public holidays include bank holidays, holidays
by Royal Proclamation and 'common law holidays'. Banks are not allowed to
operate on bank holidays. When public holidays in the Christmas and New Year
period fall on Saturdays and Sundays, alternative week days are declared public
holidays.
Do employees have the right to paid
leave on public holidays?
There is no statutory entitlement to paid leave for public
holidays.
Any right to paid time off for such holidays depends on the
terms of the worker's contract. If the contract is silent, the right to paid
leave may have built up through custom and practice.
Paid public holidays can be counted as part of the statutory
four weeks holiday entitlement under the Working Time Regulations 1998.
How is a part-time worker's holiday
entitlement calculated?
Part-time workers are entitled to the same holidays as full
time workers, calculated on a pro-rata basis. For example, an employee who works
three days a week is entitled to twelve days paid holiday - their normal working
week multiplied by four.
Can a part-time worker who works
Wednesday to Friday claim the right to paid bank holidays which fall on a
Monday?
Only if full-time workers at the same workplace are given
paid leave for bank holidays in addition to the statutory leave entitlements
under the Working Time Regulations.
The Part-time Workers (Prevention of less Favourable
Treatment) Regulations 2000 provide that part-time workers should not be treated
less favourably than full-timers in regard to their contractual terms. As most
bank and public holidays fall on a Monday, those staff who do not normally work
that day could be disadvantaged. Best practice suggests that such workers should
be given a pro-rata entitlement of days off in lieu according to the number of
hours they work.
What is the position of agency or
casual workers regarding entitlement to paid leave?
Agency and casual workers are entitled to holidays under the
Working Time Regulations 1998 in the same way as other workers. However,
entitlement will depend on their employment relationship, pattern of work and
length of service and therefore may be calculated on a pro rata basis. Where
this is the case, wages on each termination will normally contain an element of
holiday pay where the appropriate leave entitlement has not been taken.
When does a leave year start?
The Working Time Regulations 1998 stipulate that the leave
year will begin
on a date set by the employer which should be set out in the
written statement of main terms and conditions - perhaps, for example, from
April to March.
If a worker starts work part way through the company's leave
year, the initial holiday entitlement is ordinarily based on the period from
that date until the leave year ends. In most cases, employers will calculate
entitlement for a part year pro rata to the full year. So, if a worker begins
work in July and the company's leave year runs from April to March, the
entitlement will be three-quarters of the full entitlement for that year.
Can untaken leave be carried over to
another leave year?
The Working Time Regulations 1998 do not entitle a worker to
carry leave over into the following leave year. Neither may unused leave be
replaced with a payment in lieu except where employment is terminated. However,
the contract may allow contractual leave over and above the minimum entitlement
to be carried over or attract payment in lieu, if agreed.
What is an accrual system?
The Working Time Regulations 1998 were amended in 2001 to
take account of a European Court decision. The amendment allows employers the
option of introducing an accrual system for the taking of leave for workers
starting employment on or after 25 October 2001 but only during the first year
of employment. Under such an accrual system, leave is built up monthly in
advance at the rate of one twelfth of the annual entitlement.
For example, a full-time worker in the eighth month of
employment would have built up 13.5 day's leave. This calculation is based on
annual entitlement of 20 days x 8/12ths = 13.33 which is then rounded up to 13.5
days.
An employer who chooses not to introduce the accrual system
can still control the timing and taking of leave - see What restrictions may an
employer place on the taking of holidays?
Does leave accrue during periods of
absence?
As long as a contract exists between the employer and the
worker, the statutory minimum entitlement to paid holiday will continue to
accrue during periods of absence, such as long-term illness, ordinary and
additional maternity leave.
However, if a worker does not exercise their right to take
annual leave within the current leave year, then their statutory entitlement to
paid holiday will be lost as they are not allowed to carry this over to the next
leave year.
How is a week's pay calculated?
For each week of their statutory leave entitlement workers
are entitled to be paid a week's pay calculated in accordance with sections
221-224 of the Employment Rights Act 1996 as follows:
Workers with normal working
hours
If a worker's pay does not vary with the amount of work done
then a week's pay is the amount due for a week's work under the worker's
contract. Pay for non contractual overtime is excluded.
If a worker's pay varies with the amount of work done then
the amount of a week's pay is the pay for the normal weekly working hours
multiplied by the workers average hourly rate over the preceding 12 weeks. This
may occur under a piece work, bonus or commission system. To calculate the
average hourly rate only hours where the worker was working, and the pay related
to them, should be taken into account. Overtime hours can be included although
pay for these hours should be adjusted to the normal rate. Any week in which no
pay was due, for hours worked, should be replaced by the last previous week in
which pay was received for hours worked.
Shift and rota workers, whose pay varies because they work
their normal hours at varying times and in varying amounts in different weeks,
have their week's pay calculated differently. Their average weekly hours of
work, in the preceding twelve weeks, are multiplied by their average hourly
rate. The hourly rate is calculated as above and includes any shift allowance
which is payable.
Workers with no normal working
hours
If a worker has no normal working hours then a week's pay is
the average pay received over the preceding 12 weeks. Any week for which no pay
was due should be replaced by the last previous week for which pay was due.
How must a worker apply for
leave?
Any clash of requested holiday dates may be resolved by
management - for example, by considering the particular circumstances of the
individuals concerned as well as the needs of the business or by other means
such as drawing lots or agreeing ' first come, first served'.
In the absence of an agreement on the taking of leave, the
provisions of the Working Time Regulations 1998 apply:
What can a worker do if holiday
entitlement is denied?
Workers denied statutory entitlements to paid annual leave
under the Working Time Regulations 1998 should seek to settle disputes with
their employer by setting out the problem and perhaps going through the
grievance or appeals procedures, where they exist. If it is not possible to
reach an agreement in this way, workers may submit a complaint to an Employment
Tribunal within three months of the refusal. If the complaint is upheld, the
tribunal will make a declaration to that effect and may award compensation to be
paid to the worker by the employer.
Is there an entitlement to accrued
holiday pay for leave untaken on termination of employment?
Yes. No matter how short the period of employment, the
worker has the right to be paid for leave accrued during that time. Under
section 1 of the Employment Rights Act 1996 employers should include in a
written statement of employment particulars, sufficient detail to enable the
precise calculation of a worker's entitlement to accrued holiday pay on
termination of employment.
Accrued holiday on termination need not to be rounded to the
nearest half day - payment can be made for the exact amount of leave
accrued.
Unless a contract of employment improves the position, the
provisions of the Working Time Regulations 1998 apply and payment for untaken
leave should be calculated using this formula:
(A x B) - C
where:
For example, a worker who works five days a week, qualifies
for four weeks' annual leave and finished employment after six months, having
taken five days' leave, will be entitled to:
4 weeks x 0.5 - 1 week = 1 week's pay or 20 days x 0.5 - 5
days = 5 day's pay
How can holiday pay be calculated for
a worker who left after only three days in employment?
An employer should define in the written statement of
employment particulars what is a working week.
For example, based on a 5 day working week, 20 statutory
days paid holiday are due in a year.
3/5 of a week = 0.6
0.6/52 x 20 = 0.2307692
This sum represents approximately a quarter of a day.
Therefore, payment on termination for holiday accrued on the basis of three days
work, would be around two hours pay.
Employers may use different methods to calculate holiday
pay. If such methods are clearly set out in writing, the potential for claims to
be made at an employment tribunal will be reduced.
What is meant by 'rounding up'?
'Rounding up' to the nearest half-day can happen when a
worker requests leave and has, for example, only built up 0.3 of a day.
If employment is continuing, the employer may round up the
fraction to a more convenient half a day's leave. This 'rounding up' will be
taken into consideration when calculating the next period of leave.
However, if a worker has accrued 0.3 of a day's leave and
his employment terminates, he receives payment for 0.3 of a day's leave
only.
What happens when a worker has taken
more leave than their entitlement on termination of employment?
Regulation 14 (4) of the Working Time Regulations 1998
states that an employer and worker can draw up a 'relevant agreement'( for
example, in the contract of employment) to provide that a worker will compensate
the employer, whether by payment, undertaking additional work or otherwise if
leave already taken is in excess of entitlement when employment ends.
There should be a 'relevant agreement' in place; if not, and
a deduction of overpayment is made by the employer from the worker's final wage
payment, the worker may have the right to submit a claim to an employment
tribunal under section 13 of the Employment Rights Act 1996 - the right not to
suffer unauthorised deductions.
What needs to be considered when
workers request extended leave?
There is no general statutory right to extended leave
without pay and whether it is granted is a matter for agreement between
employers, their workers or, if appropriate, their trade unions. It may be
helpful to have a policy on extended leave which applies to all workers.
An agreement that a worker should return to work on a
particular date will not prevent a complaint of unfair dismissal to an
Employment Tribunal if a worker is dismissed for failing to return as agreed. In
such cases all the factors should be considered and the need to act reasonably
should be borne in mind before dismissal is carried out.
The Acas Advisory Handbook:
Discipline and Grievances at Work gives advice on drawing up policy on
extended leave and how to handle disciplinary matters.
Further information
Acas Advisory Handbook: Discipline
and Grievances at Work -order online at www.acas.org.uk or telephone Acas publications - 08702
42 90 90
Agricultural Wages Helpline - 0845 000 0134
The following Department of Trade and Industry booklets are
available at www.dti.gov.uk/publications:
-
Written statement of employment particulars (PL700)
- A
guide to the Working Time Regulations 1998
-
Part-time work: the law and best practice
This information was correct at
November 2003.
