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Holiday entitlement and pay


News

The Employment Rights (Employment Particulars and Paid Annual Leave) (Amendment) Regulations 2018,  changes the reference period in Reg. 16 WTR 1998. From 6th  April 2020, where a worker has been employed by their employer for at least 52 weeks, the reference period will be increased from 12 weeks to 52 weeks. Where a worker has been employed by their employer for less than 52 weeks, the reference period will be the number of weeks for which the worker has been employed.

The Government has announced proposals for a single labour market enforcement body which will have powers to enforce holiday payments.

See also How to make a claim for accrued Holiday Pay when you leave the job, How to make a claim if your employer won’t let you take leave, How to make a claim if your employer won’t pay you for leave you have taken, How to make a claim for breach of contract

The Entitlement

Under the Working Time Regulations 1998 (WTR 1998) every worker is entitled to be paid for any period of statutory holiday [Reg 16(1)], and in lieu of any statutory holiday entitlement which has been accrued but not used on termination of employment [Reg 14].

Agricultural workers in Wales have their own statutory provisions entitling them to holiday pay. The Agricultural Wages (Wales) Order is updated every year.

Your entitlement to holidays and holiday pay is determined by your employment contract, subject to the minimum provisions laid down in Reg. 13 WTR 998 . WTR 1998 applies to almost all workers and employees with the exception of those who are self-employed.

Your employment contract can contain better provisions than WTR 1998. If they do, those conditions become a contractual right which you can enforce in the Employment Tribunal. Your statutory entitlement is not in addition to any contractual holiday entitlement, one is set off against the other and Reg 17 WTR 1998 says that you should take the entitlement that is more favourable.

There is no legal requirement for your employer to give you a written contract of employment, but they do have to provide a written statement of particulars of employmentS1 Employment Rights Act 1996 gives you the right to a written statement of terms and conditions of employment. This is called a Section 1 Statement. The Section 1 Statement must detail your holiday entitlement, including public holidays, and give sufficient information to allow any entitlement to accrued holiday pay on the termination of employment to be calculated precisely.


How much statutory holiday are you entitled to?

You are entitled to a total of 5.6 weeks’ annual leave each ‘leave year’, made up of:

  • a ‘basic entitlement’ to a minimum of four weeks’ annual leave (20 days for a regular full-time worker) each leave year [Reg.13(1) WTR 1998].
  • an ‘additional entitlement’ to 1.6 weeks’ annual leave (eight days for a regular full-time worker) each leave year[Reg.13A WTR 1998].

The additional annual leave was granted in recognition of the eight public and bank holidays in England and Wales. There is no qualifying period of continuous service for the additional annual leave entitlement and time off for bank and public holidays can be included in your additional entitlement. Although they can be included, you don’t have the right to take the extra eight days on bank holidays or to get paid extra if you are asked to work on those bank holidays, unless it is a term of your employment contract.

You cannot agree to less than your statutory rights, but you can vary or exclude parts of your statutory rights through a relevant agreement. Under RegS. 2(1) and 35 wtr 1998, a relevant agreement is;

  • a contract of employment or any other agreement which is legally enforceable between the worker and the employer
  • a workforce agreement
  • a collective agreement which forms part of the worker’s agreement with the employer

The Leave Year

The leave year starts on a date set out in the employment contract, collective agreement or workforce agreement. If there is no such agreement in place, your leave year begins on the date you started the job [Reg.13(3) WTR 1998] .


Who is entitled to paid statutory holidays?

Workers are entitled to statutory paid holiday under WTR 1998 Reg. 2(1) which defines a worker as someone who has a contract of employment or a contract for services. This definition includes employees (including part-time employees), casual workers, freelancers and most agency workers. Employers must not try to avoid their obligations under WTR 1998 by writing contractual terms designed to bring a person outside the statutory definition of worker. This is what happened in Redrow Homes (Yorkshire) v Buckborough [2009], where the Employment Appeal Tribunal said that Redrow had given the workers a “sham” contract in order to avoid their obligations.

The following groups of people are also eligible for statutory paid holiday;

  • Certain types of Agency Workers – Reg.36 WTR 1998
  • House of Lords staff – Reg.39 WTR 1998
  • House of Commons staff – Reg. 40 WTR 1998
  • Police Officers – Reg.41 WTR 1998

Who is not entitled to statutory paid holiday?

Reg. 18 WTR 1998 removes the right to holiday from the following groups of workers;


How to calculate normal holiday pay

Your entitlement will be normally calculated in days or fractions of days. If you work a five-day week, you are entitled to 28 days of holiday pay a year which works out at 5 x 5.6.  Part-timers or those who work irregular hours or on a Rota will generally have a calculation based on the average number of hours or days worked per week. The Government provides a holiday pay calculator which tells you how much leave you have in the whole leave year.


Bonuses, allowances and holiday pay

see Bonuses and incentive schemes

Following Williams and others v British Airways plc [2011] any aspect of pay that is intrinsically linked to the performance of the tasks that a worker is required to carry out should be included in the calculation of the worker’s total remuneration.

In May Gurney Ltd v Adshead & 95 others [2006], the EAT said entitlement to a bonus that rewards productivity will mean that pay varies with the amount of work done (whether by the individual or the team of which they are part) and, accordingly, that any productivity bonus paid will be taken into account in calculating the worker’s average pay over the 12-week period.

Also an attendance bonus paid to a worker who turns up and does a full week’s work in accordance with his contract is simply part of the worker’s entitlement for working his normal working hours and has to be taken into account in calculating a week’s pay for holiday pay.


Commission and holiday pay

If you have normal working hours, commissions and bonuses must be taken into account in calculating your week’s pay if your pay varies with the amount of work done [ ERA 1996 sections 221(3), 221(4) and 222].

In Lock and another v British Gas Trading Ltd (No.2) [2016], British Gas appealed an EAT ruling that  WTR 1998 can be interpreted to require Employers to include commission payments in the calculation of holiday pay.

Mr. Lock is a British Gas salesperson whose pay included a basic salary plus commission, based on the number and type of contracts to which customers agreed. When he took annual leave, he would only receive basic pay, which was considerably less than his usual salary.

Mr. Lock argued that this was a disincentive to taking annual leave and lodged a claim with the Employment Tribunal, which referred the case to the European Court of Justice (ECJ) to clarify the relationship between holiday pay and commission for workers where commission was a regular part of their pay.

The ECJ concluded that because his commission was directly linked to the work he carried out, it must be taken into account when calculating holiday pay. The case was then referred back to the Employment Tribunal which agreed with Mr. Lock and in addition added an extra clause to WTR 1998 to make it compatible with the Working Time Directive.

British Gas appealed to the Court of Appeal, and lost. The Court of Appeal upheld the EAT decision that holiday pay must include results-based commission.  It confirmed that the holiday pay for an employee with statutorily defined ‘normal hours’, whose remuneration does not vary with the amount of work done, should include an element referable to the amount of results-based commission normally earned. British Gas was refused leave to appeal by the Supreme Court, so now all employees who earn commission will see that reflected in their holiday pay.


Overtime and holiday pay

If you receive overtime pay for working more than a fixed number of hours in a week (or other period), the overtime hours are included in your normal working hours for the purposes of calculating statutory holiday pay [ERA 1996, s 234(1)].

In Bear Scotland Ltd and others v Fulton and others; Hertel (UK) Ltd v Woods and others; Amec Group Ltd v Law and others [2015] the Employment Appeal Tribunal (EAT) said that overtime falls into several categories:

  • Guaranteed Overtime – is work the employer is obliged by contract to offer as overtime, and therefore will be liable to pay for even if the employer has none available to offer at the time
  • Non-guaranteed Overtime – is work that the employer is not obliged to provide but which, if the employer offers it, the worker is contractually obliged to perform.
  • Voluntary Overtime – is work the employer asks a worker to do but which the worker is free of any contractual obligation to perform (unless he agrees at the time to do so).

The rules for calculating holiday pay and overtime under s234 ERA 1996 are as follows;

  • Normal working hours are the same as fixed hours under the employment contract, whether or not they include overtime.
  • Only overtime which an employer is obliged to provide and a worker is obliged to carry out count as normal working hours.
  • Workers should have their normal non-guaranteed overtime taken into account when they are being paid annual leave.
  • Non-guaranteed overtime worked for a sufficient period of time in order for it to be normal must be included.
  • Voluntary overtime worked for a sufficient period of time in order for it to be normal must be included [Dudley Metropolitan Borough Council v Willetts and Others [2017]]
  • This applies to the four weeks’ holiday pay entitlement under Reg.13 WTR 1998. It does not apply to the additional 1.6 weeks paid holiday under Reg.13A WTR 1998.

The Government introduced the Deduction from Wages (Limitation) Regulations 2014 which places a two-year cap on all backdated claims for holiday pay that are brought on or after 1st July 2015. These regulations also state that WTR 1998 does not give employees a contractual right to paid leave. This means that you cannot bring a claim for breach of contract for underpaid holiday pay in the civil courts where there is a six-year time limit for such claims.


Voluntary Overtime and Holiday Pay

In Dudley Metropolitan Borough Council v Willetts and ors (2017), the Employment Appeal Tribunal (EAT) has held that payment for voluntary overtime normally worked must be included in holiday pay. The question that arises in every case is whether the payment forms part of the worker’s “normal remuneration”. The EAT said that voluntary overtime that satisfies the “normal remuneration” test must be included in the calculation of holiday pay. This would be for the first four weeks of annual leave provided for by WTR 1998.

In this case, 56 employees  were employed as specific and multi-skilled tradesmen engaged in the repair and maintenance of the Council’s housing stock. The Council calculated their holiday pay based on their core contractual hours only.

In addition to their core hours, they worked voluntary overtime and could join a standby rota for out-of-hours emergency work. An additional payment for all voluntary work, out-of-hours standby and call-outs would then be paid. The Council excluded all of the additional payments from their calculation of holiday pay on the grounds that it was not contractual pay.

The employees won the original Employment Tribunal case. Dudley Metropolitan Borough Council appealed but lost their appeal. The EAT agreed with the Employment Tribunal that holiday pay must include payments for voluntary overtime, voluntary standby and voluntary call-out payments, where that work has been undertaken with sufficient regularity to have become part of the employee’s normal pay.

This is the first binding decision on the inclusion of voluntary overtime in holiday pay. It provides a clear message to employers that regular voluntary overtime should be included within the payment for the first 4 weeks of statutory holiday.  Voluntary overtime does not have to be included in the holiday pay for the additional 1.6 weeks of holiday provided for under the WTR 1998 or any additional contractual holiday that an employer may provide.

  • The right to paid annual leave is a particularly important principle of EU social law and there is no provision for its derogation.
  • EU law requires that “normal” (and not contractual) remuneration must be maintained in respect of the four week period of annual leave guaranteed by the Working Time Directive.
  • The overarching principle is that holiday payments must correspond to the normal remuneration received by the worker whilst working.
  • The purpose of the above principle is to ensure that a worker does not suffer financial disadvantage by taking leave, which is liable to deter them from exercising this important right from which there can be no derogation.
  • In each case, the relevant element of pay (here, voluntary overtime), must be assessed in light of the overarching principle.
  • For a payment to count as “normal” it must have been paid over a sufficient period of time on a regular and/or recurring basis, which will be a question of fact and degree in each case.
  • Items that are not usually paid or are exceptional are not “normal remuneration”. In contrast, items which are usually paid and regular across time may count as “normal remuneration”.
  • Whether an item constitutes “normal remuneration” does not depend solely on there being an intrinsic link between the pay and the performance of tasks required under the contract of employment.  However, if there is such a link then that is decisive of the requirement to include that pay within “normal remuneration”.
  • In explaining the intrinsic test further, the EAT held that the focus is on the link between the payment and the performance of duties or work that is normally done within the company or for the employer.
  • It found that once the employees started working a shift of voluntary overtime, they were performing tasks required of them under their contracts of employment even if there was also a separate agreement or arrangement regarding that voluntary overtime.

Examples of voluntary overtime

Out-of-hours standby payments

Voluntarily being on the standby rota once in every four or five weeks over a period of years would be considered regular enough for the payments to have become part of normal pay.

Call-out allowances

A voluntary rota which once you are on it, you must attend the call out and this is intrinsically linked to your job.  Here the pay received is part of normal pay.

Travel allowances

This is designed to compensate you for travel time linked to overtime work.  The part of the allowance that is taxed as a benefit in kind is part of normal pay.

Additional voluntary overtime

Regular voluntary overtime falls within normal pay but not when it is unusual or rare.


Compulsory overtime and holiday pay

In Flowers and others v East of England Ambulance Trust (2017) the Employment Tribunal held that ambulance workers’ compulsory overtime for  “shift overruns” should be included in the calculation of their holiday pay.

Workers at the East of England Ambulance Trust sued their employer for unlawful deductions from wages because of the manner in which the trust calculated their holiday pay. They claimed that payment for annual leave should include;

  • overtime that is required when a shift overruns (shifts that end during an emergency); and
  • voluntary overtime that the workers can choose to do when it is offered (extra shifts planned in advance)

The workers had no choice if their shift ended during an emergency. East of England Ambulance Trust accepted that this shift overrun was overtime which should be taken into account in determining statutory holiday pay under the Working Time Regulations, and that there had been unauthorised deductions from the wages of those workers.

The tribunal ruled that the trust has to include non-guaranteed overtime for “shift overruns” in the workers’ holiday pay because the workers could not leave at the end of the shift if they were in the middle of an emergency call.


Carrying leave forward

You must take your basic four weeks’ annual leave in the leave year in which it is due. You can only carry the basic four weeks’ holiday forward if your contract allows it.  Some or all of your additional 1.6 weeks’ annual leave can be carried over to the following leave year if your employment contract allows it. This basically means that if you don’t take your annual leave, you will lose it. If your Employer is stringing you along and not allowing you to take your leave, you should give formal notice [Regs. 13 & 13A WTR 1998].


Taking your holiday and giving notice

You can decide when you want to take your statutory leave entitlement but you must give your employer notice first [Reg. 15(1)&Reg.15(4)(a) WTR 1998].

You don’t have to give your employer notice in writing, but it’s a very good idea to do so. You must give twice as many days in advance of the first day of your leave as the total number of days you want to take for your leave. For example, if you want to take 5 days off, you must give at least 10 days’ notice to your employer. Your employer can refuse your leave request without giving you a reason but you must receive at least 3 days counter-notice of the refusal. You may have a notice procedure in your employment contract which is better than the statutory procedure.

Under Regulation 15(2), your employer can tell you when to take or when not to take your annual leave in any given leave year by giving you an Employer’s notice under Regulation 15(3). The employer’s notice does not have to be in writing, but must be given at least twice as many days in advance of the earliest leave day as the number of days to which the employer notice relates. For example, if your employer wants you to take two weeks’ holiday at Christmas, you must be given at least four weeks’ notice. Your employer can ask you to take your holidays in a period where you would not have been working anyway, for example Teachers taking their leave during school holidays.


Holiday and other types of leave

Sick Leave

The main rules about holiday entitlement during sick leave have been developed by three cases, which are Kigass Aero Components Ltd. V Brown [2002],  Stringer & Others v HM Revenue and Customs [2009] and Pereda v Madrid Movilidad SA [2009]. Your employment contract may have better terms and conditions than what has been established by case law, so check its provisions. The established principles would only apply to the 4 weeks leave and not the additional 1.6 weeks, and are as follows;

  • Your entitlement to annual leave under WTR 1998 will continue to accrue whilst you are on sick leave. This is because the entitlement arises from being a worker, not from your ability to work.
  • If sickness prevents you from taking all or some of your annual leave entitlement, it must be carried over into the next leave year.
  • On termination of your employment where you have been on sick leave and unable to take paid annual leave, you are entitled to a payment in lieu.
  • If you want to take annual leave whilst on sick leave you should write a letter to your Employer indicating which dates should be considered as annual leave. If you are receiving SSP, you should be entitled to your full pay for the periods of annual leave taken during sick leave.
  • If you are unable to take your booked annual leave because you have fallen ill, your employer must allow you to take the leave at another date when you are better. This also applies to sickness whilst on holiday.
  • You have the option of taking your outstanding annual leave on your return to work if you want to.

Maternity Leave

All contractual terms (except those relating to pay) will remain during ordinary maternity leave and additional maternity leave. Statutory and contractual leave will be accrued as usual during maternity leave – section 71(4), 73(4) Employment Rights Act 1996 (ERA 1996) and Regulation 9 Maternity and Parental Leave etc. Regulations 1999.

WTR 1998 does not allow statutory annual leave to be carried over from one leave year to the next, neither do they allow your employer to insist that you should carry over the leave that you cannot take because of maternity leave. This would mean that you lose your leave, however the cases of Merino Gomez v Continental Industrias del Caucho SA [2004] and Stringer & Others v HM Revenue and Customs [2009] suggest that your employer should allow you to carry your leave over because it would be sex discrimination if you were denied your statutory annual leave entitlement because you went on maternity leave. Check your employer’s Maternity Leave policy for the rules on holidays in your workplace.

The Merino case also says that if your employer has a general shut-down holiday during your maternity leave, you must be guaranteed your annual leave at another time falling outside your maternity leave.


Adoption and Paternity Leave

Adoption leave is treated in the same way as maternity leave under Regulation 19 of the Paternity and Adoption Leave Regulations 2002.


Parental Leave

You continue to accrue your statutory leave under WTR 1998 whilst on parental leave. However, by virtue of Regulation 17 Maternity and Parental Leave etc. Regulations 1999 you do not have the right to contractual holiday unless your employment contract says otherwise.


Religious Holidays

Religion and belief are “protected characteristics” under section 4 of the Equality Act 2010. “Religion” means any religion, or lack of a religion, and “belief” means any religious or philosophical belief, or lack of such a belief. Manifestations of a religion or belief includes treating certain days as days for worship or rest. Although it is unlawful for an employer to discriminate in the workplace because of a person’s religion or belief, the EHRC Employment Statutory Code of Practice says that manifestation of that religion or belief is a qualified right which may be limited in certain circumstances.

You have the right to request leave for a religious holiday or festival, and you don’t have to give a reason. Your employer can refuse your request and justify the refusal with reasons that are not related to your religion or belief.

See Religious Festivals and Holy days and Discrimination at work


Updated: 04/03/2020

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