The Employment Appeal Tribunal (EAT) has upheld a tribunal’s award of compensation of nearly £25,000 for 131 days’ holiday that the claimant had accrued but not taken during seven years of employment. The EAT said that the claimant had a contractual entitlement to the accrued holiday, and arguments that the compensation offended the Working Time Regulations 1998 (WTR) failed.
Ms Wang, a Chinese Medicine professor, worked for Beijing Ton Ren Tang (UK) Ltd (BTRT) for seven years. There was an oral contract between BTRT and Wang entitling her to 30 days’ holiday each year. If she did not take her holidays, the agreement was that she would be paid in lieu at the end of her employment.
Following her dismissal, BTRT contended that Wang was not entitled to full payment in lieu of holidays as the oral agreement with BTRT was void under the WTR. The WTR do not allow untaken statutory holiday to be carried over to the following year, and BTRT argued that the ‘use it or lose it’ principle applied to all of Wang’s holiday entitlement, except for her entitlement in the final year of employment, which they conceded should be paid.
The EAT rejected BTRT’s argument. It found that Wang’s claim was not a claim under the WTR but under her contract. The oral contract contained no restriction on the carrying forward of leave. Under the WTR, workers are entitled to benefit from contractual leave where that is more favourable than statutory leave, and the EAT said that was the case here. Wang was therefore entitled in full to all of her accrued but untaken holiday.
The amount of pay in lieu of accrued holiday due at termination of employment will be governed by a worker’s contract (unless that is not as favourable to the worker as the statutory regime, in which case it will apply).
WTR cannot be used to defeat an argument that an employee is not entitled in full to accrued holiday pay on termination.
What you should do
Check what your contracts say about entitlement to accrued holiday on termination of employment. If they prohibit carrying forward holiday (which was not the case here), it is arguable that a payment in lieu should be restricted to the final holiday year. But make this clear in the contract.
Encourage employees to take leave that they are due during the relevant leave year.
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