Introduction
This article is based on The Working Time Regulations 1998
What is 'Holiday Leave'?
The regulations call holidays “leave”. Here are the basics:
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An employer must give four weeks paid leave / paid holiday in any year;
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You may decide your own policy as to when the year starts, but of course you may not choose a “year” after the event to suit your purpose.
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The entitlement arises only after 13 weeks of employment;
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Leave entitlement may not be replaced by a payment in lieu;
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A contract of employment may provide that if an employee takes leave in excess of his entitlement, he must make payment to his employer for the excess or make up the time or provide compensation in some other way.
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You may give notice to your employee of days in which leave / holiday pay must be taken or must not be taken. The minimum notice is twice the period of leave where notice is given of days which must be taken and once time the period where notice is given of days which may not be taken.
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There is no mention of bank holidays, so it is open to an employer to specify that national holiday days shall or shall not be included in the leave entitlement / paid holiday
We return shortly to the advise on how best to deal with these issues in your contract of employment, but here are the new laws:
Ř The Employment Appeal Tribunal (EAT) held that on termination of employment an employee has the right under the Regulations to claim pay for accrued but unused holiday pay not merely for the holiday year in which the person's contract terminated, but also for previous years of employment, back to the commencement of the Regulations in 1998.
Ř From now, it is therefore open to your employees, after termination of the employment, to apply to a tribunal for what could be massive amounts of accrued holiday pay. |
So what should you do about it?
Our advice is:
- Make sure your contract with a self-employed person really is drawn in such a way as to make clear that the contractor is not an employee - thereby limiting the number of days of paid holiday you need to give them.
- Carefully assess the status of the contractor and how the contract will be carried out in practise. Avoid labelling a contract as self-employment when it is not. See our information page on IR35
- For extra protection, specify in the self-employment or consultancy contract that the contractor agrees to take holidays and that holiday entitlement does not accrue.
- If you have employees, make sure they take their holiday entitlement, or be prepared for them to claim it at the end of their employment. (Watch out for a change to the Regulations to compel employers to make sure employees take holidays).
- Treat your staff well all year round - they are an asset. Be aware of their problems, whether at home or at work. Be sympathetic. Help where you can. Good basic employee relations are by far the best preventative of expensive tribunal claims.
- Despite all, take a robust view. Do not let prospective problems detract you from the prime work of running your business. Calculate the risk and the downside. Do not "go overboard" to prevent claims which may never arise.
Extract from the Working Time Regulations 1998
Entitlement to annual leave
13. -
(1) Subject to paragraphs (5) and (7), a worker is entitled in each leave year to a period of
leave determined in accordance with paragraph (2).
(2) The period of leave to which a worker is entitled under paragraph (1) is -
(a) in any leave year beginning on or before 23rd November 1998, three weeks;
(b) in any leave year beginning after 23rd November 1998 but before 23rd November
1999, three weeks and a proportion of a fourth week equivalent to the proportion of
the year beginning on 23rd November 1998 which has elapsed at the start of that
leave year; and
(c) in any leave year beginning after 23rd November 1999, four weeks.
(3) A worker's leave year, for the purposes of this regulation, begins -
(a) On such date during the calendar year as may be provided for in a relevant
agreement; or
(b) Where there are no provisions of a relevant agreement which apply -
(i) If the worker's employment began on or before 1st October 1998, on that date and
each subsequent anniversary of that date; or
(ii) If the worker's employment begins after 1st October 1998, on the date on which
that employment begins and each subsequent anniversary of that date.
(4) Paragraph (3) does not apply to a worker to whom Schedule 2 applies (workers
employed in agriculture) except where, in the case of a worker partly employed in
agriculture, a relevant agreement so provides.
(5) Where the date on which a worker's employment begins is later than the date on which
(by virtue of a relevant agreement) his first leave year begins, the leave to which he is
entitled in that leave year is a proportion of the period applicable under paragraph (2)
equal to the proportion of that leave year remaining on the date on which his employment
begins.
(6) Where by virtue of paragraph (2)(b) or (5) the period of leave to which a worker is entitled
is or includes a proportion of a week, the proportion shall be determined in days and any
fraction of a day shall be treated as a whole day.
(7) The entitlement conferred by paragraph (1) does not arise until a worker has been
continuously employed for thirteen weeks.
(8) For the purposes of paragraph (7), a worker has been continuously employed for thirteen
weeks if his relations with his employer have been governed by a contract during the
whole or part of each of those weeks.
(9) Leave to which a worker is entitled under this regulation may be taken in instalments,
but -
(a) It may only be taken in the leave year in respect of which it is due, and
(b) It may not be replaced by a payment in lieu except where the worker's employment
is terminated.
Compensation related to entitlement to leave
14. -
(1) This regulation applies where -
(a) A worker's employment is terminated during the course of his leave year, and
(b) On the date on which the termination takes effect ("the termination date"), the
proportion he has taken of the leave to which he is entitled in the leave year
under regulation 13(1) differs from the proportion of the leave year which has
expired.
(2) Where the proportion of leave taken by the worker is less than the proportion of the
leave year, which has expired, his employer shall make him a payment in lieu of
leave in accordance with paragraph (3).
(3) The payment due under paragraph (2) shall be -
(a) Such sum as may be provided for for the purposes of this regulation in a relevant
agreement, or
(b) Where there are no provisions of a relevant agreement which apply, a sum equal
to the amount that would be due to the worker under regulation 16 in respect of
a period of leave determined according to the formula - (A H B) - C where -
A is the period of leave to which the worker is entitled under regulation 13(1);
B is the proportion of the worker's leave year which expired before the termination
date, and
C is the period of leave taken by the worker between the start of the leave year
and the termination date.
(4) A relevant agreement may provide that, where the proportion of leave taken by the
worker exceeds the proportion of the leave year which has expired, he shall
compensate his employer, whether by a payment, by undertaking additional work
or otherwise. Dates on which leave is taken
15. -
(1) A worker may take leave to which he is entitled under regulation 13(1) on such
days as he may elect by giving notice to his employer in accordance with
paragraph (3), subject to any requirement imposed on him by his employer under
paragraph (2).
(2) A worker's employer may require the worker -
(a) To take leave to which the worker is entitled under regulation 13(1); or
(b) Not to take such leave,
On particular days, by giving notice to the worker in accordance with paragraph (3).
(3) A notice under paragraph (1) or (2) -
(a) May relate to all or part of the leave to which a worker is entitled in a leave year;
(b) Shall specify the days on which leave is or (as the case may be) is not to be
taken and, where the leave on a particular day is to be in respect of only part of
the day, its duration; and
(c) Shall be given to the employer or, as the case may be, the worker before the
relevant date.
(4) The relevant date, for the purposes of paragraph (3), is the date -
(a) In the case of a notice under paragraph (1) or (2)(a), twice as many days in
advance of the earliest day specified in the notice as the number of days or
part-days to which the notice relates, and
(b) In the case of a notice under paragraph (2)(b), as many days in advance of
the earliest day so specified as the number of days or part-days to which the
notice relates.
(5) Any right or obligation under paragraphs (1) to (4) may be varied or excluded by
a relevant agreement.
(6) This regulation does not apply to a worker to whom Schedule 2 applies (workers
employed in agriculture) except where, in the case of a worker partly employed in
agriculture, a relevant agreement so provides. Payment in respect of periods of leave
16. -
(1) A worker is entitled to be paid in respect of any period of annual leave to which
he is entitled under regulation 13, at the rate of a week's pay in respect of each
week of leave.
(2) Sections 221 to 224 of the 1996 Act shall apply for the purpose of determining
the amount of a week's pay for the purposes of this regulation, subject to the
modifications set out in paragraph (3).
(3) The provisions referred to in paragraph (2) shall apply -
(a) As if references to the employee were references to the worker;
(b) As if references to the employee's contract of employment were references
to the worker's contract;
(c) As if the calculation date were the first day of the period of leave in question;
and
(d) As if the references to sections 227 and 228 did not apply.
(4) A right to payment under paragraph (1) does not affect any right of a worker to
remuneration under his contract ("contractual remuneration").
(5) Any contractual remuneration paid to a worker in respect of a period of leave goes
towards discharging any liability of the employer to make payments under this
regulation in respect of that period; and, conversely, any payment of remuneration
under this regulation in respect of a period goes towards discharging any liability
of the employer to pay contractual remuneration in respect of that period. Entitlements under other provision
17 . -
Where during any period a worker is entitled to a rest period, rest break or annual
leave both under a provision of these Regulations and under a separate provision
(including a provision of his contract), he may not exercise the two rights separately,
but may, in taking a rest period, break or leave during that period, take advantage of
whichever right is, in any particular respect, the more favourable. |
