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Employment Law - Holidays

Calculating holiday pay used to be simple, as it was based on an employee’s basic pay. However, there have been a number of decisions, in both the European Courts and National Courts within the UK that have further defined and regulated what ‘holiday pay’ is and how it is calculated.

A key decision from these courts, in their attempt to interpret EU rulings and national legislation, is that an employee’s regular bonus payments, and most overtime, should all be included when calculating holiday payments. In other words, employers can no longer calculate holiday based on a flat rate.

While this is one of the more hotly discussed areas of Employment law, it is nonetheless vital that both employees and employers understand how holiday pay works. Here at Davies and Partners, we specialise in employment law and we understand how important it is for both employers and employees to understand the law. Understanding how such payments are calculated will help employers avoid breach of contract claims and employees to pursue their employment rights.

For Employers

As an employer, you should understand that different employees will receive different holiday allowances, based on their contract. This is because the ‘base’ rate is 5.6 times how many days they work in the week. In other words, a full time employee, working 5 days, is entitled to 28 days annual leave. This entitlement for someone working 3 days a week, on the other hand, is 16.8 days rounded up to 17. However, this statutory leave is limited to 28 days per annum, so a staff member working 6 days a week does not gain more time off.

For staff working irregular hours, the government has an online tool to help calculate this. This can also be used to determine allowances for staff starting or leaving after the start of the year.

The full time minimum of 28 days per annum is inclusive of Bank Holidays. The employment contract should specify whether employees are required to work on Bank Holidays or not.

For Employees

As an employee, you should check your contract and be aware of what it says, ensuring it is legally valid. For fixed work, whether part-time or full-time, minimum annual holiday is 5.6 times how many days a week you work, to a maximum of 28 days.

When it comes to holiday those working irregular hours will have the calculation based on how much you were paid over the last 12 weeks.

However, this is just the start of the story with other earnings such as bonuses or overtime often but not always being relevant to the calculation. The complexity has caused a lot of employment litigation in recent years.

Ultimately, it helps if both employees and employers double check that any holiday entitlement is in-line with the law and, especially where areas such as bank holidays and overtime are concerned, clearly outlined in the contract.