Holidays & Holiday Pay

by Hazel Phillips

As of 1st October 2007 the law governing entitlement to annual leave has changed. Every worker is now entitled to the equivalent of 4.8 weeks off work per year. A further increase will be implemented on 1st April 2009 and will bring the statutory minimum to 5.6 weeks per year. This means that as of 2009 every employee working a 5 day week will be entitled to 28 days’ holiday per year.

These changes represent a substantial increase to the statutory minimum (presently 20 days) and bring issues regarding the calculation of holiday entitlement and holiday pay back to the fore. This issue of the bulletin aims to explain the implications of the new amendments.

Background

Prior to 1st October 2007, the vast majority of workers were entitled to 4 weeks’ holiday per year. This was calculated on a pro rata basis, so if someone worked 5 days a week, they would get 20 days’ holiday per year.

The 4 weeks holiday could include bank holidays and there was no obligation on employers to let workers take their annual leave on bank holidays.

The changes

The Working Time (Amendment) Regulations 2007 that came into force on 1st October 2007 increase the statutory holiday(s) entitlement. When fully implanted, this change effectively adds an allowance for the 8 annual bank holidays to the previous minimum of 4 weeks but will be implemented in two stages (as explained above) in order to give employers a chance to adapt.

If a worker is part-time, their allowance will continue to be worked out on a pro rata basis as before. In addition, there is still no right for the worker to get holiday on the bank holidays. The allowance has been increased to take account of these days, but employers are still in a position to dictate when these extra days are taken.

How holiday entitlement is calculated

As of 1st October 2007 the current statutory minimum is to 4.8 weeks’ holiday and this has to be applied to the current holiday year. This means that if your holiday year does not commence on 1st October you will have to work out what proportion of the new entitlement your employees are entitled to for the current holiday year. For example, if an employer’s holiday year starts on the 1st April, then an employee will be due 4.4 weeks holiday in this holiday year, 4.8 for the 2007-2008 holiday year and 5.6 weeks for the 2008-2009 holiday year. The government has devised a ‘ready reckoner’ to make things easier and this can be found at www.berr.gov.uk/employment/holidays.

How holiday entitlement is calculated in the first year

Employees will still accrue holiday during their first year of employment in the same way as before (at a rate of 1/12th of their annual entitlement each month). However, the amount of holiday that a worker will accrue each month has now increased.

When holiday can be taken

As mentioned above, the new rules do not introduce the right to be off work on bank holidays. Unless a worker’s contract specifies otherwise, bank holidays must be requested like any other holiday.

In terms of requesting holiday the Working Time Regulations 1998 are unchanged, in that they state that in order to take holiday the worker should give the employer notice that is twice the length of the holiday that they intend to take. The employer can refuse to allow this holiday to be taken by giving the worker notice that is the same length as the holiday that the employee had intended to take. In other words, if an employee wants a week off work, they have to give the employer two weeks’ notice of this. If the employer wants to refuse these holiday(s) then they have to give the worker notice of one week. There is no requirement for the employer to act reasonably when considering requests for holiday and they do not have to consult the employee before turning down their request.

However, most employers specify different rules with regards to the notice they require for holidays in their contracts of employment and it is a good idea to do so. The regulations still allow employers to have a great deal of control over when holidays are taken and this can be particularly useful if an office shut down is required or if you have certain periods when holiday cannot be taken because of business need.

Carrying holiday forward

Prior to the amendments workers were unable to carry over statutory holiday(s) into the next holiday year. The new rules allow employees to carry over 1.6 weeks of the statutory minimum into the next holiday year. However, the regulations do not give employees the right to do so and it is up to each employer to decide whether they will allow this.

Payment in lieu of holiday

Prior to the amendments to the rules, the only occasion on which an employee could receive payment in lieu of holiday entitlement was on termination. This rule has been amended temporarily to help ease the problems employers will face with workers being off work more often. Until 1st April 2009 (when the full change to 5.6 weeks comes into force) employers can pay their workers in lieu of the additional entitlement of 0.8 weeks holiday. This option ceases on 1st April 2009 and from then onwards all workers must receive their full statutory holiday entitlement with pay without there being any option for employers to pay in lieu.

Holiday pay

The rules regarding holiday pay have not changed, but there are certain points that are worth emphasising.

It is still forbidden to offer ‘rolled up’ holiday pay. Therefore you must actually pay the worker for the time they are away and not just add the equivalent figure to their pay throughout the remainder of the year.

Following the case of Ainsworth, workers are not entitled to holiday pay when they are on long term sick leave for longer than one year. For such employees, holiday pay is not an option when SSP runs out.

Women continue to accrue holiday during ordinary maternity leave and they are entitled to receive holiday pay when they take their holiday.

Implementing the new statutory minimum entitlements

If your workers already receive 28 days or more holiday then you do not need to do anything. It is only if your staff receive the old statutory minimum of 20 days including bank holidays or less than 4.8 weeks holiday per year that you need to act. In these circumstances, you need to increase their holiday entitlement immediately and should write to them to let them know you have done so. Any new contracts which are issued should also be amended to include the increased entitlement.

If the increased holiday allowance is going to cause problems in your company then consider whether tighter restrictions regarding when holiday can be taken would assist you. If they could then think about introducing a policy on holiday(s) but remember to consult any relevant unions or consultation groups and to follow a proper procedure when doing so.

If your contracts of employment currently stipulate that workers are entitled to the ‘statutory minimum plus all bank holidays’, then on the face of it this means that that when the changes to the law are complete by 1st April 2009 your staff will be entitled to 36 days off per year. Employers were concerned about this, so a concession was made, in that, if all contracts offered every worker in the organisation the statutory minimum plus bank holidays, then the contract will be read as meaning that the worker is entitled to 28 days’ holiday per year and the additional allowance will be disregarded.

This change to the law has made holiday entitlements incredibly complex. If you require specific advice on how the changes apply to your business or you are considering altering your terms and conditions to accommodate the extended holiday allowance then please approach us for specific, tailored advice.

For further information on holidays and holiday pay, contact the employment law team of Burnetts Solicitors on 01228 552222.

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Oct 2007