Elizabeth Lang, a partner in the London employment team at Bird & Bird, looks at how UK holiday entitlement compares to standards across Europe and further afield.
In the UK, the statutory minimum holiday entitlement for full-time workers rose in April 2009 to 5.6 weeks, or 28 days. The entitlement is to paid time off. For most workers, payment is at the normal rate of salary. Where variable hours or rates of pay apply, payment is based broadly on the average rate of pay during the previous 12-week period.
The previous minimum was set at 20 days under the Working Time Regulations 1998, in force from 1999. This then rose to 24 days in October 2007, which applied until the increase in April 2009. It is important to stress that the statutory minimum entitlement includes the eight UK public holidays. If these are paid days off work, they will count towards the legal minimum.
In practice, many employers were offering at least 20 days plus bank holidays before the recent increase – it is common to see contracts with between 25 and 30 days plus bank holidays, and of course teachers and MPs have considerably more.
Having said this, the increase has had a real financial impact on some employers. In particular, many low-paid workers, agency temps and freelance workers on short-term contracts have traditionally only been paid for the statutory minimum holiday entitlement, and this has increased in real terms by 40% since October 2007.
There is a separate and complex legal issue about whether pay can lawfully include a ‘rolled-up’ element for holiday pay, or whether the leave must be actually taken and paid for. This is beyond the scope of this article.
Based on the legal minimum entitlement, we do not fare particularly well on the holiday front compared to our counterparts in many European countries:
20 days plus nine public holidays.
20 days (24 for employees who work six days a week), with between nine and 13 public holidays depending on the federal state.
Minimum of 20 days plus 10 bank holidays, but on top of normal pay for holiday, many employees are entitled to an additional one-off ‘holiday bonus’ of 92% of one month’s pay, payable around May every year.
30 days plus 14 public holidays, subject to certain qualifying requirements.
Similar to Finland, but the number of public holidays can vary according to the region.
Minimum entitlement of 25 days, plus 10 public holidays.
In many countries, collective agreements provide greater entitlements than the statutory minimum. However, it is also the case that in many countries, where public holidays fall on a weekend, there is no compensatory extra day off as we have in the UK, so it can be misleading to assume all public holidays represent paid holiday.
There is no legal right to paid holiday at all, but the usual practice is to grant between two and four weeks.
No legal minimum, though guidelines suggest workers should be paid for between one and two weeks of holiday. In practice, some holidays are often granted around the four different public holidays (which amount to 10 working days).
Giving employees additional holiday is something that increasing numbers of UK employers are offering as part of a flexible benefits package. This may include, for example, the ability to ‘buy’ a certain number of additional days of holiday. This is often arranged as a salary sacrifice for an additional period of leave on top of the core entitlement. Ironically, highly-paid employees, who are more likely to be able to afford this option, are often the ones who find it hard to take their full entitlement.
The idea of using unpaid or part-paid time off as a cost-cutting measure is a relatively recent, but notable development. In particular, British Airways employees have agreed to take between one and four weeks of unpaid leave to save costs, and many Honda employees recently took extensive time off during a shutdown as an alternative to redundancy. The arrangement was reported to include part pay during the shutdown period, and an agreement to work unpaid overtime upon the return to work up to the value of the pay they received during the shutdown.
Many other employers are considering similar measures to avoid or reduce the number of redundancies, and many employees have agreed to part-time work hours, unpaid time off, or simple salary cuts.
If reduced hours are agreed with a consequent reduction in salary, this will be reflected as a variation to the employment contract. It is possible to agree the variation on an indefinite basis, for a specified period of time, or for it to be conditional upon certain conditions.
Having a reduced salary will generally affect the salary-related benefits, such as statutory maternity pay, pension contributions or the rate of holiday pay to which the employee is entitled. The alternative is to maintain salary at the full rate but to agree that the employee will take a period of unpaid or part-paid leave as an exceptional measure. In this way, the employee’s benefits would remain the same. One advantage to the employee in this arrangement is that any notice and redundancy pay would be calculated on the unreduced rate.
Short-time work subsidy
In certain countries, including Germany, there is a state fund ‘short-time work subsidy’ that subsidises up to two-thirds of lost pay to employees who have had their hours and pay cut. This means that employers in Germany often structure cutbacks so as to allow their workers to qualify for these funds. In broad terms, this requires them to show that one-third of their employees are undergoing a 10% reduction in hours due to economic circumstances outside the employer’s control.
This year, the German government extended the benefit period for this partial unemployment compensation from six to 24 months, because of the economic downturn, and more than 6,000 companies are currently introducing reduced hours.
There has been extensive lobbying for similar measures to be introduced in the UK, but whether this will be done remains to be seen. In the meantime, employees will remain entitled to paid holiday of at least the legal minimum entitlement or, if greater, what is provided in the contract of employment. Any further time off and the terms of payment that apply must be by agreement. In the current climate, employees are more likely to agree to take unpaid or part-paid leave where this is presented as an alternative to redundancy.