3 things to know about the law on holiday entitlement

1. How much holiday entitlement are you entitled to each year?

Employees (ie those employed under a contract of service) and workers (ie those employed under a contract for services) are entitled to minimum statutory holiday of 28 days in each leave year based on a working week of 5 days (which could be shorter depending on the number of days actually worked each week). For example, if you work 4 days each work your annual entitlement to holiday would be 22.4 days. If you work 6 days each week there is no entitlement to receive more than the minimum statutory holiday entitlement of 28 days.

Statutory holiday entitlement also includes 8 days public and bank holidays).

The leave year is that specified by an employer but is normally a calendar year (ie from 1 January to 31 December) or the financial year (ie 1 April to 31 March).

The statutory right to holiday entitlement is set out in regulation 13 of the Working Time Regulations 1998 (Regulations), which implements the European Working Time Directive (Directive).

Employers are free to provide more than the statutory holiday entitlement.

Holiday entitlement under the Directive is 20 days.

2. When can you take holiday?

Statutory holiday entitlement should be taken during the employer’s leave year. There is no statutory entitlement to carry over unused holiday entitlement from one leave year to the next leave year unless:

• the employer specifies this in a relevant agreement (eg employment contract) up to a maximum of 8 days (regulation 13A of the Regulations);
• or you are unable to take your holiday entitlement in the current leave year as you are on maternity leave, adoption leave or parental leave.

You must normally give notice to take holiday. This appears to apply even if you are off sick on the expiry of the leave year (Fraser v Southwest London St George’s Mental Health Trust UKEAT/0456/10).

3. How is holiday pay calculated?

Until recently, the entitlement to statutory holiday pay was believed to be based on week’s pay only (regulation 16 of the Regulations), which was believed to be basic pay. If there is no set basic pay then this would be the average pay earned over a 12-week reference period (sections 221 to 224 of the Employment Rights Act 1996).

However, recent decisions have widened the definition of a week’s pay under the Regulations. The Court of Justice of the European Union in Lock v British Gas Trading Ltd [2014] ICR 813 held that commission payments that were directly and intrinsically linked to an employee’s or worker’s work must be reflected in holiday pay for the purposes of Article 7 of the Directive which defines holiday pay as “normal pay”. The Employment Appeal Tribunal in the conjoined cases of Bear Scotland Ltd and others v Fulton and others UKEATS/0047/13 held that “normal pay” also included regular overtime payments.

As the law stands at the moment, a week’s pay for the purposes of the Regulations would include all components of pay that have been made for a sufficient period of time to justify that label. This appears to be limited to 20 days under the Directive rather than 28 days under the Regulations.

In practice this will mean that if you earn regular commission or work regular overtime this would form part of your normal weekly pay. Therefore, you could bring a claim against your employer which in theory could go back to 1998.

See also this recent post on a recent relevant Employment Appeal Tribunal case about untaken holiday pay during sick leave on our separate employment law blog.

More help or advice needed?

If you have not been paid the correct holiday pay, please contact us on 0330 175 7609 or email us at enquiries@ibblaw.co.uk.

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