EU regulations coupled with recent case law means that many practices and other employees are confused about holiday pay, so let’s examine the entitlement.

1) ENTITLEMENT BY LAW

Statutory Entitlement

Legislation, particularly the Working Time Regulations 1998, means UK workers are entitled to at least 5.6 weeks paid holiday.

For most practices operating a 5 day week this means 28 days a year which includes all public holidays. Employers can restrict times when holiday leave can be taken (for example during busy periods).

Part time workers can’t be treated any less favourably and must receive the 28 days pro-rata. Certain special rules apply to trainee doctors.

“Workers”

The obligation for holiday pay relates to “workers” and so is excluded if someone is self-employed. However, take care when determining this, since recent cases have shown that sub-contractors who appear to be self-employed may be legally defined as workers because of their obligation to provide work.

Accrual

Holiday entitlement (the “holiday year”) accrues from the first day of work, and accrues, even if the worker if off sick, at the rate of one twelfth of their monthly entitlement (e.g. 2.33 days). So an employee who started work on the 1^st of January and leaves on the 31^st July in the same year will be entitled to 16.31 days. Whilst you can’t round down days (in this case the employee couldn’t be paid for only the 16 complete days) many employers find it easier administratively to round up to half days.

Leaving

When a worker leaves employment they must be paid all outstanding holiday pay for holidays which have accrued, but which they have not yet taken.

A week’s pay?

For most employers calculating a week’s pay is not an issue but where a worker is entitled to extra remuneration such as overtime, commission or a bonus this can become a problem. Guaranteed overtime is always included and following recent tribunal cases, non-guaranteed overtime earnings (Bear Scotland –v- Fulton) and sales commission (Lock-v-British Gas Trading Ltd) form part of a week’s pay but with the latter case only having been recently decided (appeal pending as at August 2015) there remains concern over exactly how that “week’s pay” is calculated.

Booking time off

Employees must give employers at least twice the length of time that they want to take holidays as notice – so at least 2 weeks notice for 1 week’s holiday. Employers can refuse holiday dates provided the employee gets their statutory entitlement. Unauthorised holidays are a disciplinary matter.

2) ENTITLEMENT BY EMPLOYMENT CONTRACT

An employment contract can make some changes to the statutory entitlement. Workers can receive more than 5.6 weeks (but never less) and the employer/practice can choose the holiday year start date for all employees (e.g. 1^st January each year).

3) BACK CLAIMS

Whilst employees can claim holiday pay retrospectively, from 1^st July 2015 the Deductions from Wages (Limitation) Regulations 2014 mean this is limited to unpaid holidays for up to 2 years, irrespective of whether that forms part of an employment contract (which would normally allow employees to back claim for up to 6 years).

Calculating holiday pay update (10th March 2016) here.