Making sure employees receive the right amount of holiday allowance and holiday pay

  • Helping you ensure that your employees and workers take the statutory minimum amount of holiday each year and that holiday pay is calculated correctly.

Holiday allowance

Full time employees and workers (who work 5 days a week) are entitled to a minimum of 5.6 weeks’ paid holiday a year, which equates to 28 days of annual leave.

This can include the 8 bank holidays in England and Wales.

Part time employees and workers are entitled to paid holiday as well, calculated according to the number of hours they work.

Calculating holiday entitlement for employees and workers who work irregular hours (for example shift workers) is a little more complex. Their holiday entitlement is 12.07% of the hours that they work. For shift workers, holiday allowance is usually calculated according to the average number of hours worked over a 12-week period.

If you want to increase an employee’s or worker’s holiday entitlement, this can be done by setting out a higher allowance within their employment contract. However, you can’t decrease holiday entitlement below the statutory minimum set out above.

The law states that employees and workers must take 20 days holiday per year, otherwise it will be lost. The exceptions to this are if employees/workers were unable to take holiday because they were sick, injured, pregnant or on maternity leave. In these circumstances, the employee and/or worker can carry forward their holiday into the next holiday year.

You can add additional rules to your employment contracts or staff handbook in relation to the carry over of holiday. This could include limiting the amount of days that can be carried over (unless an exception applies) and confirming when any carried over holiday must be taken by.

If you are concerned that your employees may not be taking the minimum holiday requirement or if you would like to ensure that your company’s contracts and policies are up to date, then please get in touch as we can help. We can also assist you in clearly setting out the process that should be followed when booking holiday.

Holiday pay

Holiday pay should be paid for the time when annual leave is taken. Companies cannot include an amount for holiday pay in an employee or worker’s hourly rate (‘rolled-up holiday pay’). If any of your employee/worker contracts in place still include reference to rolled-up pay, then you should re-negotiate those contracts. We can advise you on liaising with those affected in order to re-negotiate their terms of employment.

Employees and workers are entitled to a week’s pay for each week of leave they take. A week’s pay is worked out according to the kind of hours worked and how they are paid for the hours.

Employees should be entitled to receive their “normal remuneration” during at least 4 weeks (20 days) of their annual leave. However, if an employee or worker receives bonus payments or commission payments, works overtime or receives any other types of payments which are intrinsically linked to the performance of their duties, these should be considered when calculating holiday pay.

If you are concerned that holiday pay is not being paid correctly, for example that bonus and commission payments are not being considered when holiday pay is calculated, please contact one of our team who can help you assess the different elements of pay and the method used to calculate holiday pay. We can then advise whether any changes need to be made.

If changes are required, we can advise you on the process to follow in order to minimise the risk of any claims being brought against the company.

We have offices in Southampton, Richmond, London, Guildford, Woking and Lymington. Contact us for expert employment law advice.

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