Making a mistake with holiday entitlement and holiday pay can be very costly. Employment law surrounding holiday can also be a minefield, so it’s important to get it right.

Employment Tribunals about disputed holiday pay and entitlement are a surprisingly regular occurrence. It can become more confusing if you employ workers who are not full-time employees.

Just a few months ago, a dentist who sold his business to a practice but continued as an associate, won a substantial amount at a tribunal appeal hearing. 

He claimed the company owned him £83,500 in unpaid holiday pay over six years. The dentist also claimed that he was owed a further £42,000 in interest.

By not having the right contracts in place regarding holiday pay, this was a costly error by the dental practice.

Two-year limit overruled

Until earlier this year, complaints about holiday pay were brought as unlawful deductions in wages. These claims were limited to two years’ worth of underpayment. 

But a tribunal hearing in February ruled that the two-year limit was unlawful. As a result, it could mean an employee can go back to 1998 when the Working Time Regulations came into force. We will not know the finer details until an appeal is made against the ruling. But it outlines the importance of a clear contract with employees.

What you need to know about holiday pay

With so many tribunals and much confusion, what do you need to know about holiday pay? The first point we make at Shrewd HR is that getting contracts in place is essential. This demonstrates that you are clear about holiday leave and payments and leaves no ambiguity. It also means you won’t be paying for costly mistakes later.

Anyone who is classed as a ‘worker’ is legally entitled to 5.6 weeks – that’s equivalent to 28 days – of paid holiday each year. This is known as statutory leave entitlement. This entitlement includes agency workers, workers who work irregular hours and those on zero-hour contracts.

Those who are part-time employees are entitled to a pro-rata amount of paid holiday based on their working hours. This is calculated by multiplying the number of days they work by 5.6. For example, someone working 2 days a week must get at least 11.2 days leave a year.

Anyone working irregular hours – including shit workers or term-time staff – will be given holiday pay for each hour they work. Using the government’s holiday entitlement calculator can save time when it comes to calculating entitlement for those who work irregular hours.

What about statutory leave limits?

Full-time employees are entitled to 28 days paid holiday, even if they work more than their full-time hours. For example, if someone works 6 days in a week, their entitlement is only 28 paid days’ holiday. 

You can offer more leave than the minimum if you wish in these circumstances. But make sure you have clear rules and contracts in place to ensure you don’t leave yourself open to a tribunal hearing.

What about bank holidays?

Employers do not legally have to give paid leave for bank holidays. Whether you do or not depends on your business. If you’re normally open on bank holidays, you may not choose to offer paid bank holidays. 

As ever, you must make your position clear on the first day of an employee’s employment. And ensure it is clear within your contracts.

The only exception is if you have a store that’s bigger than 280m2, as you cannot open on Christmas Day.

What about carrying over unused holidays?

There is no automatic right for employees to carry over leave they have not used in the allocated period. But there are some exceptions legally. This includes:

• Where workers are unable to take leave entitlement due to long-term sickness
• If a worker is prevented from taking leave entitlement due to a period of statutory leave (for example, maternity leave)
• Where a worker was unable to take their leave because of workload commitments

You should always encourage your team members to take their leave and make efforts to promote a healthy work-life balance. Should your company not allow leave to be carried over, ensure all employees are made aware.

Help with understanding holiday entitlement 

One mistake with holiday pay or contracts can be seriously costly. We help you get ahead of compliance issues so they don’t come back to bite. It’s about prevention, protection and peace of mind.

So if you are unsure about an employee’s holiday entitlement, get in touch with us today. We can have a no obligation chat about your concerns.