Everything you wanted to know about…Annual Leave…but were too afraid to ask!

The legislation and rules surrounding annual leave can often be difficult to interpret, so the team at MLP have tried to outline in plain terms answers for the queries we are asked about most often.

How much annual leave are employees entitled to?

Full-time employees have the right to 5.6 weeks (28 days) of paid annual leave per year.

How about for part-time employees? How is their annual leave entitlement calculated?

Those working part-time are entitled to the same amount of holiday as full-time employees, but their entitlement is calculated on a pro rata basis.

Part-time leave is calculated by multiplying the number of days worked per week by 5.6. This means that if an employee works three days a week, they will be entitled to 16.8 days of paid annual leave. If someone works four days a week, they will have the right to 22.4 days.

Do I have to pay my employees for bank holidays?

Employees do not have a legal right to be paid to be off work on public holidays. Generally, bank holidays are counted as part of the statutory 5.6 weeks.

What do we need to pay employees while they are on holiday?

For workers with fixed working hours, holiday pay amounts to their weekly normal remuneration.

If an employee’s hours vary from week to week, a week’s pay is calculated as the average weekly remuneration (including commission and bonuses) over the previous 52 complete weeks (or, if the employee has been employed for a lesser period, to the period of complete weeks for which they have been employed) counting backwards from the first day of holiday.

Can I require employees to take annual leave at certain times?

Yes.  You can enforce periods of annual leave by giving a period of notice that is double the length of the annual leave that you are going to ask an employee to take i.e. 2 weeks’ notice for 1 week’s annual leave.

Is guaranteed overtime included in the calculation of holiday pay?

Yes. Guaranteed overtime, where the terms of the employment contract dictate that an employer pays for agreed overtime, must be included within the calculation of holiday pay.

What about non-guaranteed overtime?

Overtime which the employer does not have to offer, but which employees are obliged to do under their contract, should be included where it has been worked for a sufficient period of time to be considered ‘normal’ working hours for that employee.  This only applies to the minimum four weeks of leave that is established in EU law. It does not apply to the additional 1.6 weeks’ leave that is provided by the UK Regulations.

Does commission need to be included as part of holiday pay?

Yes, an employee’s holiday pay must be based on their basic pay and any results-based commission (which varies with the amount of work done) and so would have been earned if they were not on annual leave.

Can I pay an employee in lieu of holidays?

No.  This can only be done upon termination of the employment relationship, where any accrued but untaken leave must be paid.

What is rolled-up holiday pay? Is it legal?

Some employers have a practice of “rolled-up holiday pay”, which involves not paying holiday pay while the employee is on leave, but paying the employee an extra amount during the weeks that the employee works.  It is a practice, however, that can be viewed as discouraging employees from taking a rest from work.  After several, high-profile cases in this area the current advice from the Government is to avoid this approach and instead pay holiday pay as and when the holidays are taken by the employee.

Are employees on long term sick leave and maternity entitled to annual leave?

Statutory holiday entitlement is still accrued while an employee is off work sick or on maternity leave.

Can employees carry over untaken annual leave?

Generally, the right of carry over applies only to the 1.6 weeks of annual leave that employees are entitled to under UK law.  This means that if an employee receives 28 days’ leave they are able to carry over up to a maximum of eight days, subject to agreement with the employer in a “relevant agreement”, for example the contract of employment.  If the employee’s annual leave entitlement exceeds 28 days, again, you may allow the employee to carry over any extra leave depending on the terms in their contract or the staff handbook.

Employees are generally not allowed to carry over the 20 days that they are entitled to under EU law, unless they have been unable to take annual leave because they are on leave for a different reason, for example sick, maternity or parental leave, in which case they can carry over some of their unused leave to the next year.  An employer must allow the employee to carry over up to 20 days if they were sick or, for example, on maternity leave, and could not take the leave in that leave year.  Following the Covid-19 pandemic, however, this right has been now extended to allow carry over for up to 2 years, for any reason, in respect of those 20 days.

Next week….disciplinary procedures

Please don’t hesitate to contact the team at MLP with ideas about topics or for detailed advice in connection with any of the issues raised.