After a long hard winter the holiday season is finally upon us. Paid time off from work may mean a dream vacation for some, for others, the opportunity to catch up with friends, family or the gardening. Some may just take time out to do nothing. Whatever their plans, many employees regard holiday to be the most significant employment benefit that they receive, writes Gareth Edwards.
Q. How much holiday are my employees legally entitled to?
From their first day of employment, employees begin accruing statutory holiday entitlement under the Working Time Regulations. In each leave year, they are entitled to take 5.6 weeks annual leave - termed 'statutory holiday'. For an employee working five days a week, this amounts to 28 days leave each year which can include the usual bank/public holidays.
Part time workers are entitled to a pro-rated equivalent, in other words, someone working three days a week will receive 3/5ths of 5.6 weeks leave, namely 17 days.
The position for those who work irregular hours remains unclear. The WTR are silent as to how their entitlement should be calculated however the DirectGov website advises that 5.6 weeks holiday is equivalent to 12.07% of the hours worked. This means that for every hour an employee works he accrues just over 7 minutes holiday.
To calculate the holiday entitlement of a shift worker, the employer must calculate leave based on the average shifts worked during the 12 week period immediately prior to the requested leave period. The DirectGov website gives the following example: "if you always work four 12 hour shifts, followed by four days off then the average working week is three-and-a-half 12 hour shifts. You would be entitled to 19.6 shifts of 12 hours as annual leave a year: 5.6 weeks x 3.5 shifts = 19.6 12 hour shifts"
An employer is free to offer more than statutory holiday. Anything in addition to statutory holiday is known as 'contractual holiday'.
Q. How much do we have to pay our staff when they take holiday?
Employees are entitled to a week's pay for each week of leave. How a week's pay is calculated will depend on the circumstances of the employee. For employees with normal regular hours of work this generally means their basic salary without any commission or bonus. However, if the employee's pay fluctuates week to week due to the amount of work done in their hours of work (i.e. where pay is linked to productivity) or the time the work is carried out (i.e. where the employee's pay is linked to a shift pattern which varies week to week), holiday pay will be based on their average pay during those normal working hours over the previous 12 working weeks, including any "commission or similar payment which varies in amount". Overtime pay will only be included in the calculation where overtime is guaranteed.
If the employee works irregular hours, a week's pay is simply calculated as an average of all the sums earned in the previous 12 working weeks. This would include any overtime payments and commission.
The purpose of the WTR is to ensure that staff have adequate rest from work. When the WTR were first introduced casual workers with irregular working patterns were often given "rolled up holiday pay". However, the European Court of Justice ruled that rolled up holiday pay is unlawful as it means that a worker receives no pay while they were actually on holiday, their holiday pay being "rolled up" into the pay they receive whilst working. This is likely to deter employees from taking holiday which was contrary to the intention of the WTR.
Q. Are our staff entitled to bank or public holidays in addition to their holiday entitlement?
There is no statutory right to bank or public holidays. When answering this question, the first thing to look at is the contract of employment. If it states that staff are entitled to "x days holiday plus bank or public holidays" then employees are contractually entitled to bank/public holidays. If you do not have a written contract or your contract states that the employee is entitled only to "statutory holiday" then, the employee has no express legal right to bank or public holidays. If an employee wishes to take leave on a bank or public holiday it will be a matter for discussion with you, the same as any other request for leave on any other day of the year.
If in your organisation, bank or public holidays are given in addition to "normal" holiday entitlement as a matter of custom and practice then your employees may have accrued an implied legal right to bank or public holidays.
This year we have had the Royal Wedding, next year there is the Queen's Diamond Jubilee, so in 2011 and 2012, employees with a contractual right to public holidays will be entitled to nine public holidays rather than the usual eight.
Part time workers who have a contractual right to bank or public holidays have a right to a pro-rated equivalent of their full time colleagues. It does not matter that the part time worker does not normally work on the day on which the bank/public holiday falls. So, an employee who works Tuesday, Wednesday, Thursday will be entitled to 3/5ths of the annual bank/public holidays occurring that year, even though they never actually work on a Monday or Friday which, are, in the main, likely to be bank or public holidays!
Q. Can we require our staff to take leave when it suits us?
Under the WTR, an employee must give notice if they wish to take statutory holiday equal to at least twice the period of leave that they are requesting. An employer may object to the request for leave by giving a counter-notice. This must be given at least as many calendar days before the proposed leave is due to commence as the number of days which the employer is refusing.
An employer may give notice ordering an employee to take statutory holiday on specified dates. Such notice must be at least twice the length of the period of leave that the employee is being ordered to take. In many cases employees will be notified at the commencement of their employment or the holiday year of planned shut down periods (typically during summer months and over the Christmas period).
Q. What happens to unused holiday?
Under the WTR unused statutory holiday expires at the end of the holiday year. An employee is not entitled to carry statutory holiday over or to be paid in lieu of unused statutory holiday (although there are exceptions to this in the case of maternity and long term sickness absence - see below). You may however agree that staff may carry over unused holiday into subsequent holiday years and you may impose the condition that such holiday is used within a specific period or is otherwise lost. Such agreements can give rise to a number of knock on technical issues and should therefore not be entered into lightly.
On termination of employment, the employee is entitled to be paid in lieu of any accrued but untaken holiday entitlement.
Q. We have an employee about to take maternity leave, what do we do about her holiday?
Women on maternity leave continue to accrue holiday during their leave. So, a woman taking her full maternity leave entitlement of 52 weeks will accrue a full year's holiday entitlement. The employer has the option of requiring the employee to take the holiday she will accrue either before or after her period of maternity leave. Allowing the employee to take it in the holiday year that they return could be problematic for the business as the employee will of course continue to accrue their usual holiday entitlement during that year, leading to considerable absence from work.
In many cases, employers will ask the employee to take some holiday before they start their maternity leave and hold some over until they are about to return. The same principles apply to employees taking paternity leave and parental leave (often much shorter periods than maternity leave) where the period of leave spans two holiday years and the employee therefore risks losing their holiday entitlement. It will be for the employee and employer to agree that holiday is taken before the leave period or is rolled over into the new holiday year to be taken on the employee's return.
Q. I have an employee who has been off for some time due to ill health, what do I do about his holiday?
An employee continues to accrue statutory holiday during sickness absence, even if they are absent for the whole holiday year. This means that an employee who has exhausted their sick pay entitlement (whether statutory or contractual) could request to take paid holiday during their sickness absence. It is generally agreed that employees who are not permitted to take their statutory holiday while they are on sick leave are allowed to carry holiday over to the next holiday year.
An employer who gives employees more than the statutory holiday entitlement can provide in the contract of employment that the additional contractual holiday does not accrue during sickness absence.
Q. My employee was sick during their holiday and has told me now that they are entitled to re-schedule their holiday, is this correct?
The position is unclear. The European Court of Justice has held that an employee who is incapacitated during a period of previously scheduled statutory holiday should have the right to reschedule the holiday for a later date. The Employment Tribunal in the case of Shah v First West Yorkshire Limited ET/1809311/09 agreed with this proposition.
However, neither the ECJ nor the ET's decision is definitive on this point. In the absence of clarity, an employer may wish to require that holiday will only be rescheduled where the employee has complied with its sickness absence procedures during their holiday period (rather than after having returned) and include in its sickness absence procedure a requirement that in these circumstances the employee is required to provide a medical certificate confirming their illness.
Gareth Edwards is a partner in the employment team at Veale Wasbrough Vizards.