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Holiday pay – Tricky issues

With the holiday season about to commence, we review the five common questions asked by employers in relation to holidays and holiday pay.

1. Can I dictate how much and when an employee can take their holiday?

Employers can require employees to take their holiday on a certain date, but they have to give twice as much notice as to the amount of holiday that is required to be taken. So therefore, if you wanted employees to take three days’ holiday, you would have to give six days’ notice of when you require that leave to be taken.

Usually, employers require outstanding holidays to be taken whilst an employee is working their notice; employers should consider including a provision in the contract of employment which states that employees may be required to take any outstanding holiday during the notice period.

2. Can I make a payment in lieu of accrued but untaken holiday at the end of the holiday year?

No. The only situation where you can pay any accrued but untaken holiday is when the employment has ended.

3. Does holiday accrue whilst an employee is off sick?

Holidays continue to accrue whilst an employee is on sick leave, and if the employee has not been able to use their entitlement due to sickness, they must be permitted to carry forward holiday to the subsequent year. The Employment Appeal Tribunal in the case of Plumb v Duncan Print Group Limited has held that if an employee has been unable to take their statutory holiday in the relevant holiday year, the holiday can be carried forward but it must be taken within 18 months of the end of the relevant leave year.

4. What happens to holiday if an employee falls ill during holiday?

An employee who is sick either before or during a period of annual leave can take their holiday at another time even if it means that it is carried over into the next leave year.

5. How do I calculate the payment of holiday? Do I have to include any overtime that would have been earned during the period of holiday

It is likely that where overtime is intrinsically linked to the performance of the task, overtime payments should be included to calculate holiday pay. Failure to include overtime in calculations could result in employees bringing claims of breach of contract and unlawful deduction from wages. Click here to read the link to our briefing which deals with the calculation of holiday pay and overtime.

It is important that the contracts of employment and your holiday policy set out clearly the arrangements for the accrual and taking of holiday. We set out below some points to be included.

What should your contract of employment/policy say about holidays?

  • The number of days the employee is entitled to
  • The minimum notice that staff must give to take holiday
  • The maximum holiday that can be taken at one time
  • A requirement that staff use up their holiday in their notice period or garden leave period;
  • The right to make a deduction from pay on termination of employment if holiday has been taken in excess of the accrued amount
  • How payment in lieu of unused holiday will be calculated
  • Rules about carrying forward unused holiday from one year to the next
  • Procedure where an employee falls sick during holiday; and the evidence that the employee is required to provide.

If you require any further help then please contact Sejal Raja on Have a wonderful and relaxing summer holiday!

July 2015
© RadcliffesLeBrasseur


This briefing is for guidance purposes only. RadcliffesLeBrasseur LLP accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.

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