HOLIDAY ENTITLEMENT & RELATED MATTERS
As we approach the summer holiday season, it is appropriate for employers to refresh their understanding of the various issues surrounding annual leave entitlements for workers. In the first of two Information Updates, we remind employers of some of the rules both from the Regulations and case law surrounding this issue.
The Working Time Regulations 1998 came into force on 1st October 1998 and implemented the European Working Time Directive which provides all workers with an entitlement to 4 weeks’ paid annual leave. On 1st October 2007, the UK increased the entitlement by 1.6 weeks.
There has been a steady flow of case law decisions (all the way up to our Supreme Court and the European Court of Justice (ECJ)) addressing various aspects surrounding the provision of employers providing workers with 4 (or 5.6) weeks paid annual leave.
The EU Directive provides all workers with an entitlement to 4 weeks’ paid annual leave. (“Directive Entitlement”).
The UK increased the entitlement by 1.6 weeks (“UK Supplemental Entitlement”) so that workers in the UK were entitled to a minimum of 5.6 weeks’ paid leave in each holiday year (“Minimum Entitlement”).
Employers can offer more than the Minimum Entitlement as a contractual benefit (“Contractual Entitlement”).
For a worker, working 5 days a week, this equates to 20 days (Directive Entitlement) plus 8 days (UK Supplemental Entitlement). This is subject to a cap of 28 days (based on an employee working 5 days a week); in other words, if an employee works 6 days each week, they will only be entitled to 28 days holiday entitlement). Part time workers will be entitled to a pro rata equivalent based on the number of days / hours they work.
Statutory (bank / public) holidays can be included within the Minimum Entitlement. In otherwords, bank / public holidays do not need to be in addition to the above entitlements.
When can leave be taken?
Annual leave entitlement should be taken within the holiday year. Employers need to manage the holiday entitlement and are expected to encourage workers to take their entitlement.
The holiday year can be set by the Employer in a Relevant Agreement (e.g. contract of employment, employee handbook, or collective agreement); or in the absence of such, the default position is that the holiday year commences on the first day of employment, and each anniversary thereafter; except where employment commenced before 1st October 1998, in which case the default holiday year commences on the 1st October each year.
Employers can dictate when holidays are taken – e.g. by requiring workers to take their annual leave entitlement (in full or in part) during shutdown periods (e.g. Christmas shutdown / Summer shutdown).
Where there is flexibility (where entitlement exceeds any dates fixed by the employer) an employee can request time off on specified dates. An Employer has the right, in a Relevant Agreement, to specify certain arrangements such as:- how much notice a worker should give to book annual leave; periods when a worker is not allowed to take time off during certain periods (e.g. busy seasonal periods); and limits on how much annual leave can be taken at any one time (e.g. not more than 2 weeks annual leave at any one time).
Employers can decline a worker’s request to take leave on proposed dates if there is a legitimate business reason for doing so. Examples of this include: - operational reasons, busy periods, or the worker needs to be present on site for in-house training or a client meeting; a number of other workers within the same department have already had request for annual leave approved; and you need to retain minimum staffing requirements.
What happens if a Worker does not take their leave within the holiday year?
Generally, the annual leave entitlement will be forfeit. However, there are some exceptions to this.
If a worker has been unable to take their Minimum Entitlement and/or Contractual Entitlement due to being on maternity leave / adoption / paternity / parental leave etc., then the holiday accrued but untaken at the end of the holiday year must carry-forward into the subsequent holiday year.
If a worker has been unable to take their annual leave entitlement due to being absent from work due to sickness, then the Directive Entitlement must carry-forward into the subsequent holiday year. The UK Supplemental Entitlement and any Contractual Entitlement over and above the Directive Entitlement does not need to carry-forward but Employers would be advised to have a provision in the contract / holiday rules to confirm this position.
A Relevant Agreement can provide that the UK Supplemental Entitlement may be carried forward into the subsequent holiday year. Similarly, an Employer can permit or restrict any carry-forward of any Contractual Entitlement (in excess of the Directive Entitlement) into the subsequent holiday year.
When does holiday accrue?
The Minimum Entitlement begins to accrue from the first day of employment.
Holiday entitlement will also accrue during any period an employee is absent either on maternity leave / paternity leave / adoption leave or any other statutory leave.
The Minimum Entitlement will accrue during any absence due to sickness or injury. The Contractual Entitlement will also continue to accrue during any absence due to sickness or injury unless there is a contractual provision to the contrary.
What do I pay the Worker when they go on holiday?
The answer to this question has caused a huge volume of case law. The courts have determined that ‘Paid leave’ means that the worker should be paid their ‘normal pay’ when on holiday. So what does ‘normal pay’ mean? We will cover this in Part II.