Insights 27.1.20 Author: Andreja Okamgba

Holiday allowances and holiday pay – how to get it right

Insights 27.01.2020 Author: Andreja Okamgba

Some companies have started a new holiday year in January, and the majority of others will give out fresh holiday allowances from 1 April 2020

This is therefore the perfect time to talk about some of the frequently asked holidays and holiday pay related questions. 

Who is entitled to holiday and what is the minimum entitlement? 

All employees and workers are entitled to a holiday allowance and this includes agency workers, workers with irregular hours, those on zero-hours contract and part-time and fixed-term employees. 

The minimum legal holiday entitlement is 5.6 weeks which for a full-time worker works out to be 28 days per year. There is no additional right to time off on public holidays.  

How do I calculate the allowance for casual workers? 

It can be notoriously difficult to work out holiday allowance for someone who works different hours from week to week. It is generally accepted that allowance for these individuals can be worked out based on the hours they worked, calculated as 12.07% of hours worked. Someone who worked 100 hours in the past month, would have accrued 12.07 hours of holiday. Please note that this calculation should not be applied to term-time only and seasonal workers; their allowance should be calculated on the basis of the average hours worked over the past 12 weeks (but this may be due to change, please see the last question below). 

How much should workers be paid when on holiday? 

Holiday pay has been the subject of a number of court cases over the past few years and it is now established that holiday pay should include, in addition to basic salary, all elements of pay intrinsically linked to the job such as commissions, bonuses, overtime including voluntary overtime if this is worked with sufficient regularity, stand-by/call-out payment and acting up allowances. 

Is it legal to operate “use it or lose it” policy, or do we have to allow workers to carry over the unused holiday allowance? 

Holiday allowance is designed to be used in the holiday year it is given for. Four weeks of holiday derived from the EU law must be used and cannot be carried over, any additional allowance would be subject to employer’s policies. Typically, where carryover is allowed, this would be capped (for example 5 days), and the carried over allowance would need to be used by a certain cut off point (typically 3 months into the new holiday year) or it is lost. 

The employer must allow carry over in situations where the worker was unable to take their allowance. This could be because their requests were rejected, long-term sickness or other absences such as maternity leave. Where possible, outstanding allowances should be used before extended leave commences. 

Can the employer dictate when holiday is taken? 

Yes, legally the employer can tell the employee when to take holiday as long as at least the minimum notice is given which is twice the length of the holiday to be taken. This right is often used for Christmas closures or for a company-wide summer holiday. 

What happens if a worker gets ill during planned holiday? 

When a holiday is interrupted by illness, it will make it impossible to rest and relax, which is the main purpose of the holiday. In these cases, employees may be allowed to reclaim the holiday allowance disrupted by illness. In these circumstances the employer is allowed, as part of their policyto ask for proof of illness to avoid abuse. 

Are there any changes planned to holiday entitlement or holiday pay? 

There are imminent changes to how the holiday pay is calculated to be implemented from April 2020. Currently the most widely used and accepted reference period for calculating holiday pay for those without set working hours, is to take the average of the previous 12 weeks. This causes a problem with casual workers who might be encouraged to take leave during quieter periods, which will cause their holiday pay to be lower. By averaging out the entire year, the pay would be more representative of the overall working pattern and therefore fairer. 

Contact us

Do you have any further questions or require any clarifications on the above point, please get in touch with our HR Consultancy team.