CONTRACTS - 23.10.2018

What holiday provisions do you need?

Legal requirement

S.1 Employment Rights Act 1996 says that the written statement of employment particulars must include any terms relating to “ entitlement to holidays, including public holidays, and holiday pay (the particulars given being sufficient to enable the employee’s entitlement, including any entitlement to accrued holiday pay on the termination of employment, to be precisely calculated)”.

Holiday entitlement

The holidays clause in your employment contracts (see Follow up ) should specify: (1) your holiday year, preferably the same one for everyone - if you don’t specify a holiday year under the Working Time Regulations 1998 (WTR) it will begin on the date the employee’s employment begins and each employee would have a different holiday year; (2) the employee’s annual holiday entitlement, which is a minimum of 5.6 weeks (28 days for a full timer), but it can be more; and (3) whether holiday entitlement includes bank and public holidays - there’s no legal right to paid bank holidays, so if you allow bank holidays as annual leave, ensure your contracts set out either a fixed number of days’ holiday plus bank holidays, or a fixed number of days which includes bank holidays.

Pro advice. Part-time employees are entitled to a pro rata equivalent of the full-time entitlement.

Taking holiday

Include the details for requesting and taking holiday in a holidays policy (see Follow up ). Under the WTR , you can: (1) require employees to give a minimum period of notice that they wish to take holiday, turn down their requests and require them to take holiday at times to suit you; (2) during the first year of employment, limit holiday taken to what’s been accrued; and (3) provide that holiday must be taken in the holiday year in which it’s due. There’s no statutory right to carry forward untaken holiday, but case law has provided exceptions in relation to long-term sickness and maternity absence, when some or all of it can be carried forward for up to 18 months.

Pro advice. This is all covered in our holidays policy.

Holiday pay

Include any holiday pay calculation in a non-contractual holidays policy rather than in the employment contract. Holiday pay is straightforward to calculate for salaried employees, but if staff receive regular overtime payments, commission, certain bonuses, etc., these should now generally be averaged out and built into holiday pay calculations, at least for the first four weeks of the statutory holiday entitlement.

Termination of employment

On employment termination, the WTR provide for payment in lieu of accrued but untaken holiday, so include a provision covering this.

Pro advice. Also include provisions enabling you to: (1) make a deduction from final salary for holiday taken in excess of accrued entitlement on employment termination; and (2) require the employee to take any outstanding holiday entitlement during their notice period, to avoid having to make a payment in lieu.

Holidays clause

Holidays policy