Everything You Need To Know About Holidays and Holiday Pay

Introduction

For most of us, holidays are the highlight of the year and one of the most important rights enjoyed by workers.

But the law can be confusing. In this article, we answer the most commonly asked questions about holidays and holiday pay.

Holiday entitlement

Who is entitled to holiday?

All employees (i.e. those who work under a contract of employment) are entitled to take paid holiday which is sometimes called “annual leave”.

A broader category of individual, called a “worker” is also entitled to holiday. Workers don’t have quite the same relationship that employees have with the employer, and don’t have as many rights, but they cannot be said to be genuinely self-employed i.e. purely in business for themselves.

A lot of individuals who work in construction and as part of the gig economy (work involving short-term tasks carried out by independent contractors, such as couriers) have been classed as “workers” by the courts. Our blog ‘What are my rights? Employment Status and the Gig Economy’ covers these topics in more detail.

How much holiday should I get?

The Working Time Regulations 1998 introduced the right to paid holiday.

Originally, the regulations gave workers the right to 4 weeks of holiday each holiday year. This was done to comply with European laws. It was later extended by the UK by another 1.6 weeks a year (to represent 8 days bank holidays – see “Am I entitled to take off bank holidays?” below). This is called “additional leave”.

This means all workers are legally entitled to a total of 5.6 weeks holiday a year. This is often called “statutory holiday” as it comes from the law rather than any agreement between the employer and the worker and the worker cannot be denied it.

Some employers will give employees more holiday than this. This is called “contractual holiday” as it is what the employee is entitled to under their contract of employment.

Different rules can apply to the different types of holiday: the original 4 weeks under European law (which give workers greater rights), additional leave and contractual holiday.

A note on European law

It is worth mentioning that the Working Time Regulations implemented the European Working Time Directive in Great Britain when the UK was still a member of the EU. The Working Time Regulations are still valid law and they remain in force even after Brexit. When we refer to ‘European law’ in this guide, it is to indicate the original source of the holiday entitlement (because of the difference in rules that can apply between that and the other elements of holiday entitlement).

Am I entitled to take off bank holidays?

Although additional leave increased holiday entitlement for workers by the same number of days as there are bank holidays, it did not provide a right to take off bank holidays.

So, if your workplace does not close on bank holidays, you cannot insist on taking off the bank holidays (but can request to do so).

Taking holiday

Can I choose when I take holiday?

This will depend on the rules that are in place regarding your holiday.

Larger employers tend to issue an employee handbook to their staff. This will usually set out how you request holidays, as well as any other rules around taking holidays.

Alternatively, the rules on holidays might be contained in your contract of employment (if you are an employee) or in a collective agreement or workforce agreement (if your employer has one in place with a trade union or staff association).

However, it is very unlikely that any employer will allow workers to simply take holiday whenever they want as it could harm their business if too many people are off work at once.

Where the rules for requesting holidays are not set out in any of the documents mentioned above, the Working Time Regulations will govern how holiday requests must be made.

These state that a worker should:

• Request holiday by telling the employer which days they wish to take off; and
• Give advance notice of their request – with the number of days’ notice being at least twice the number of days’ holiday being requested.

Below are some examples of how this might look in reality:

Example

It is Monday, and Kunal wishes to take Friday off as holiday. Kunal has to give twice as much notice as the holiday he is taking, so he must give 2 days’ notice. The notice must be given before the holiday is taken so he must give notice before Wednesday.

Nina wants to go away for two weeks in June. She must ensure that she gives her employer at least 4 weeks’ notice before she goes.

Employers are entitled to refuse holiday requests. It is always best to make sure your employer has agreed to your holiday before you make any bookings.

If an employer receives a holiday request and wants to refuse some or all of the holiday being requested, it must give the worker at least the same amount of notice as the number of days being refused.

Example

Alex wants to take a week’s holiday in April. She gives her employer at least 2 weeks’ notice before the date she plans to start her holiday. However, because April is her employer’s busiest time, they decide to refuse 3 days of her holiday. This means they must give Alex 3 days’ notice, before the date of the planned holiday, that they are refusing this part of her request. If they had wanted to refuse Alex’s holiday request completely, her employer would have been required to give Alex at least one week’s notice.

Employers can also request that a worker takes holiday on a certain date. Like workers requesting holiday, however, the employer must give the worker twice the amount of notice as the holiday requested.

Example

Faiza works at a factory. The owners of the factory decide to shut it down for 2 weeks in the summer. Faiza’s employers must give her at least 4 weeks’ notice prior to the date of the proposed shutdown.

My employer closes down between Christmas and New Year each year and I have to take holiday. Can they make me do this?

Yes. This is likely to be set out in a contract of employment or as part of a collective agreement if it happens every year. If it isn’t, they should give you at least twice as much notice as the number of days’ holiday they wish you to take.

I want to take 3 weeks off work to go to Australia but my employer’s holiday policy only allows for 2 weeks at a time. What can I do?

Your employer is allowed to make rules as to when holiday can and can’t be taken. Even if your employer did not have any written rules on how much holiday can be taken at once, they could still refuse your request by giving the right notice.

However, most employers will consider requests for longer periods of time off when it’s for something special or a one-off. The best approach is to talk to your manager.

My child has fallen ill with a bug. Can I use holiday to look after them?

You will be entitled to unpaid leave to arrange for the care of your child (our blog on taking time off to care for dependants has more on this). However, where you do not have anyone else who can look after your child, taking holiday is often a sensible approach.

In this situation, you won’t have had sufficient time to give advance notice and you won’t know how much time you will need off. As such, your employer could refuse the request but most are unlikely to do so. The best approach is to talk to your manager and explain the situation.

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Holiday pay

How should my holiday pay be calculated?

The law on holiday pay, and how much it should be, is complicated.

Confusingly, different rules apply as to how holiday pay should be worked out for the original 4 weeks’ holiday and the additional 1.6 weeks’ holiday! This stems from the different legal origins of the two holiday entitlements; the 4 weeks’ holiday entitlement derived from European law and has many more rights attaching to it (see A note on European law above).

What should holiday pay for the 4 weeks’ holiday include?

So long as the payments are made regularly over a period of time, holiday pay for the 4-week entitlement should include the following:

• Basic wages/salary
• Overtime;
• Commission;
• Performance bonus;
• Travel allowances (excluding any actual expenses);
• Shift allowances; and
• On-call payments.

What should pay for the 1.6 weeks’ additional leave include?

This is less generous and depends on whether you have normal working hours, and if so, whether your pay varies. The questions that follow cover some common situations.

I work irregular hours. How should my holiday pay be worked out?

If the amount of pay you receive each week changes depending on the amount of work you do, then your holiday pay should be based on an average of the pay you received in the 12 weeks before you took your holiday. From April 2020, this will be worked out over 52 weeks (or over your whole employment if you have worked fewer than 52 weeks).

Your holiday pay should also include any commission, bonus and allowances you normally receive. This is the same for all holiday, both the 4 weeks and additional 1.6 weeks.

For the last year, I’ve been working regular overtime but only get paid my basic salary for my holidays. Should I be paid more for my holidays?

This will depend on what type of holiday you are taking. Most employers work on the basis that the original 4-week entitlement under the Working Time Regulations is taken first, with the additional leave of 1.6 weeks taken after that.

If you are taking part of your 4-week entitlement, then your holiday pay should include overtime.

If you are taking all or part of your additional leave, then unless the overtime is compulsory and guaranteed (in that even if it is not worked you are still paid for it), it will not need to be included.

I work in sales and get paid quite a low basic salary but I earn good commission. My holiday pay is only based on my salary. Is this right?

Again, this will depend on what type of holiday you are taking. Most employers work on the basis that the original 4-week entitlement under the Working Time Regulations is taken first, with the additional leave of 1.6 weeks taken after that.

If you are taking part of your 4-week entitlement, then your holiday pay should include commission.

If you are taking all or part of your additional leave, then your employer does not need to include commission if you work the same hours each week and commission is just paid as a result of a successful sale (rather than due to any extra work you have done).

At Christmas we all received a team bonus. I took holiday in January. Should the bonus be taken into account when my holiday pay is calculated?

Whether a team bonus needs to be included in any calculation of holiday pay is unclear. It is possible that as the Christmas bonus was paid to the whole team and does not seem to be based on your own performance, then your employer does not need to take this into account when calculating holiday pay.

Holiday years

When does my holiday year start?

Usually, the holiday year is set out in your contract of employment or in a collective agreement between your employer and a trade union or staff association. Many employers have a holiday year that runs from 1 January to 31 December but the year can start on any date your employer chooses.

If your employer has not set out the date on which the holiday year starts:

• for workers who started work before 1 October 1998, the holiday year will start on that date (each year);
• for workers who started work after 1 October 1998, the holiday year will start on the anniversary of their start date.

Carrying over holiday

I haven’t got round to using all of my holiday this year. Can I carry it over to the next year?

If you simply have not got around to using your holiday, the general rule is that you will lose it and your employer does not have to allow you to carry it over.

But your employer may allow you to carry over any unused holiday and many employers have a rule as to how much holiday can be carried over each year. Some employers also say by when it has to be taken.

It is important to remember that the right to holiday was brought in to protect workers’ health and safety. As such, workers should be encouraged to take their holiday to ensure time is spent away from work.

My boss says that if I take holiday I won’t be paid for it. So, I only took a week last year. Have I lost the rest of that holiday?

If you are a worker (rather than genuinely self-employed) and are discouraged from taking holiday by your employer saying you will not be paid for it, the 4-week holiday entitlement under European law will be carried over to the following year. It will keep being carried forward until you are allowed to take it or you leave (when you will be entitled to be paid for all holiday you have been denied – see below).

Maternity leave

I am due to go on maternity leave soon and won’t have time to use all of my holiday before I do. What happens to it?

You can carry over all of your unused holiday to the next holiday year.

It would be an act of unlawful discrimination if you were not allowed to do this. For more on this, see our page on discrimination claims.

Many employees prefer to end their maternity leave and take some holiday instead before coming back to work so that they receive full pay.

My employer’s holiday year is January to December. I am coming back from maternity leave in June. What will my holiday entitlement be?

You will be entitled to the same amount of holiday as you would be if you had not been on maternity leave i.e. your full entitlement. You will also be entitled to any holiday that you had not used the year before.

Sickness

I have just been to Tenerife for 2 weeks. I got a stomach bug the first night I was there and was ill for a week. Can I get that holiday back?

This will depend on what type of holiday you were taking. Most employers work on the basis that the original 4-week entitlement under the Working Time Regulations is taken first, with the additional leave of 1.6 weeks taken after that.

If you are taking part of your 4-week entitlement, and it is interrupted due to illness, you can get this holiday back.  However, you are likely to need some proof that you were ill, such as a doctor’s note.

I am on long term sick leave due to depression. I am not receiving sick pay. Can I take some holiday and be paid for it? If I don’t take holiday, what will happen to it?

You can take part of your 4-week entitlement to holiday while you are off sick by giving your employer notice that you wish to take holiday (see Taking Holiday above). You can then go back on sick leave after your holiday.

If you do not take holiday whilst on long-term sick leave, the 4-week element of your holiday entitlement will carry over to the next year but will need to be taken within 18 months unless your employer allows you to take it over a longer period.

Leaving employment

I am leaving my job. What happens to the holiday that I haven’t taken this year?

When you stop working for an employer, you are entitled to be paid for any holiday that you have built up that year which you have not taken.

I resigned halfway through the holiday year having used up all of my holiday for that year. Can my employer take the excess holiday out of my final wages?

Your employer can do this if a term in your contract of employment allows them to do so. If you do not have a written contract or if the written contract does not have such a term, then they cannot take the excess holiday off your final pay.

I resigned without working my notice period. My employer is now refusing to pay me for the holiday I am owed. Can they do this?

If you are owed statutory holiday (i.e. part of the 5.6 weeks), then your employer is not allowed to withhold this even if you should have worked your notice.

If you are owed contractual holiday (i.e. have a holiday entitlement that is more than 5.6 weeks), then your employer can do this if there is a term in your contract of employment allowing them to do so.

If you have not worked your notice as you have resigned due to how your employer has treated you, you might have other employment claims. See our pages on constructive dismissal and wrongful dismissal.

I have been dismissed for gross misconduct and my employer is refusing to pay me for the holiday I have built up but not used. Can they do this?

If you are dismissed for gross misconduct, your employer does not need to give you any notice or pay you any notice pay.

But, your employer will have to pay you for any statutory holiday (i.e. any of the 5.6 weeks) that you have built up that year but not used.

They could withhold payment for contractual holiday but only if the contract of employment allows them to do this.

Our unfair dismissal page has more information on your rights in this situation.

I have been made redundant and was hoping that pay for my outstanding holiday would be added to my final pay so that I will have a bit more money. But my employer says I have to take my holiday during my notice period. Can I refuse?

No. Your employer can tell you when to take holiday so long as they obey any terms in your contract or give you the right amount of notice (see Taking Holiday above).

Holiday claims

What do I do if my employer has not paid me the right amount of holiday pay?

In this situation, you may have the right to bring an employment tribunal claim. This could be a claim under the Working Time Regulations or for unlawful deductions from wages (i.e. a claim for money you should have been paid).

However, you should first raise a grievance with your employer to see if the issue can be resolved.

If it can’t be resolved, then you would need to follow ACAS Early Conciliation before bringing your claim.

What do I do if my employer has prevented me from taking holiday?

Again, you would have a right to bring a claim under the Working Time Regulations and also for unlawful deduction from wages.

As above, you should bring a grievance first and would need to comply with ACAS Early Conciliation before bringing a claim.

How long do I have to make a claim?

If you have not been paid properly, you have 3 months from when you should have received the correct holiday pay to bring a claim. This is extended by following the ACAS Early Conciliation process.

My holiday pay has never included overtime. How far back can I claim for this?

If you have worked regular overtime over a period of time, then this should have been included in your holiday pay for the 4-week period of holiday under European law. If it has not, then you can bring a claim going back two years.

This is the case for any holiday pay claim where your employer has not included everything it should when working out what to pay you.

Contact Truth Legal

With an honest and ethical approach to law, Truth Legal’s specialist team of lawyers have the expertise to help you with all your employment law matters. Our Head of Employment Law is Navya Shekhar, an employment law solicitor with over 10 years’ experience.

If you have been denied holiday or do not think you are being paid properly for holiday – call us on 01423 788538 or contact us here.