Holidays and leave: what are your employees entitled to?

You must comply with legal requirements on employees' working hours. Giving employees fair holidays and pay can also help to improve performance, reduce accidents and cut unauthorised absenteeism

Entitlement to paid leave

Full-time employees are entitled to 28 days' paid statutory holiday each year. Employers can provide additional holiday in excess of the statutory entitlement, in which case the details will need to be properly set out in the employees' contract of employment.Part-time employees, temporary staff and casual workers are entitled to paid holidays on a pro-rata basis. If you give your full-time workers more than the statutory entitlement, your other workers are also entitled to the same amount of holiday leave pro-rata. There is a holiday entitlement calculator on the GOV.UK website.

You should develop a policy for statutory leave for workers who may be entitled to paid leave for parts of days.

The options are:

• Round days up (but not down).
• Carry days forward (but everyone must take at least four weeks in the leave year).
• Devise a system for late starting or early finishing to get part-days out of the way.

Employees accrue paid leave from their first day of employment, with their rights accruing at one-twelfth of the annual entitlement per month worked, rounded up to the nearest half day.

Absence from work and holiday pay

The right to paid annual leave continues to accrue, even during periods of absence (eg for illness, maternity, paternity or adoption leave), so that, on termination, workers should be paid in lieu of any holiday not taken. An employee on sick leave should not take paid holiday during that sick leave while in receipt of statutory sick pay (SSP). More information on this is available from Acas.

Calculating holiday pay

Holiday pay is based on 'normal remuneration', including commission, regular overtime and other payments. Care should be taken and legal advice sought if in any doubt.

For workers on normal working hours, getting fixed wages for working fixed hours, you pay the net fixed wage, including any fixed amounts normally paid on a regular basis (eg bonuses or commission). Overtime is not counted except if you are required to provide it in your contract with the employee, and they are required to work it.

If an employee works normal working hours but their pay varies with the amount of work done (eg piece rates) or is partly made up of bonuses or commission based on output, calculate their average hourly rate over the past 52 weeks (or the average of the previous weeks worked if fewer than 52 weeks). Ignore any premium element for overtime. Holiday pay is calculated by multiplying the average number of normal weekly working hours by the average hourly rate.

Employees that are paid commission on sales, where the commission is intrinsically linked to the performance of the tasks the employee carries out, should have their commission taken into account when you calculate statutory holiday pay. An appropriate method of calculating the amount of commission to be paid for holiday pay might be to base it on average commission over the last 12 months.

If an employee works shifts, so that hours and pay vary each week but in a set pattern, or there are no normal working hours, holiday pay is calculated from average weekly pay over the previous 52 weeks (or the average of the previous weeks worked if fewer than 52 weeks). Overtime is included.

Time off for bank and public holidays

According to GOV.UK, bank or public holidays do not have to be given as paid leave, but an employer can choose to include bank holidays as part of a worker’s statutory annual leave.

There are usually eight bank holidays in the UK. In 2023, there is an extra bank holiday for the coronation of King Charles III. An employee's entitlement to that extra day depends on the wording of the employment contract. For example:

• if the contract says bank holidays are paid holidays, employees will get an additional day's paid holiday
• if the contract gives a total number of days' holiday each year, employees will not automatically get an additional day's holiday

Employers can decide whether to add the additional bank holiday but do not have to.

Most retailers open during bank holidays and expect their staff to work their normal or Sunday hours whereas many office-based businesses close. If your employees take bank or public holidays off work, this should come out of holiday entitlement according to Acas and GOV.UK. They also state that: "Employers can set the times when workers can take their leave - for example, a Christmas shut down."

Leavers

You can claim holiday pay back if an employee leaves after having taken full holiday entitlement, but you cannot deduct overpaid holiday pay from the final wage payment unless there is a written agreement for the deduction of wages.

So, in practice, if the worker is difficult, you may have to decide whether to sue, given the amount of money involved and the message to other employees.

Pay in lieu of holiday

Most employers make it plain in their terms and conditions of employment that employees are expected to take their holidays within the calendar year (with such entitlement to carry it over to the next year as you think reasonable), but that they do not provide pay in lieu of holiday (except in respect of any holiday entitlement outstanding from the final year of employment). In fact employers are prohibited from making payments in lieu of untaken holiday except upon termination of employment.

In respect of health and safety, you should consider whether the employee is endangering themselves or perhaps even others, by not taking holidays. If so, insist that holiday be taken, if necessary, making it a disciplinary matter. An employer is entitled to give notice to an employee requiring them to take holiday.

Unpaid leave

New mothers are entitled to take 13 weeks' unpaid additional maternity leave as part of their statutory maternity leave entitlement. (Statutory maternity pay is only paid for 39 weeks even though new mothers are entitled to take 26 weeks' ordinary maternity leave and 26 weeks' additional maternity leave.) In some cases, fathers may be able to take some of this leave where the mother or co-adopter returns to work before the end of her statutory period of maternity leave or pay.

You might want to consider offering extra unpaid leave to new and adopting fathers (in addition to the two weeks' paid ordinary paternity leave and additional paternity leave that new and adopting fathers may be entitled to).

Employees (both mothers and fathers) with children under the age of 18 who have completed one year's service are entitled to take up to 18 weeks' unpaid parental leave for each child born or adopted. This can be taken at any time before the child's fifth birthday. Parents of children with disabilities can take 18 weeks' unpaid parental leave at any time up to the child's 18th birthday.

All employees are also entitled to 'reasonable' time off to deal with an emergency involving a dependent, such as a sick child or elderly relative, or to attend a dependent's funeral.

Since 6 April 2020, all employed parents have had the right to two weeks' leave if they lose a child under the age of 18 or suffer a stillbirth from 24 weeks' of pregnancy. Eligible parents can claim parental bereavement pay.

Special cases

Employees are also entitled to time off in other special cases including:

• To accompany a colleague to a disciplinary, grievance or request for flexible working hearing.
• To act as employee representative on a business transfer or in relation to redundancies.
• Jury service.
• To carry out duties as trustees of an occupational pension scheme.
• For employees aged 16 or 17 who have not achieved a prescribed standard in their education or training, to study or train for a relevant qualification.
• For certain employees aged 18, to complete study or training already begun
• For trade union activities.
• To carry our duties as a safety representative for health & safety purposes.
• To carry out public duties (eg as a Justice of the Peace, prison visitor, local councillor, etc).

Workers being made redundant can take time off for job-hunting or to train for other employment and are entitled to a maximum of two-fifths of a week's pay.

Holiday requests

You can specify when holidays can be taken (eg a Christmas shutdown), provided that everyone gets at least the statutory entitlement off at some time during the year.

You can ask for two days' notice for every day of leave requested and it makes sense for you to spell this out in employment contracts. You can then make exceptions if it seems reasonable and convenient to do so.

If you refuse a request for time off, you must do so in writing, at least as many days in advance of the holiday as the length of the holiday requested. So, for instance, if an employee asks for two weeks off at an inconvenient time, you must decline at least two weeks before they wanted their time off to start.

Beware making exceptions or refusing requests on discriminatory grounds (eg sex, race, disability, age, religion or philosophical belief or sexual orientation including transsexual people).

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