Minimum holiday entitlement: Q&A

Q I heard on the news that the minimum holiday entitlement is set to increase, but not immediately. Is that right?

A Yes it is. The Working Time Regulations 1998 introduced the right to paid time off for all workers, and this was the first time there was the legal right to have paid holiday. The current maximum level of paid annual leave is to increase, but this will be done gradually over the next two years, with the first increase in October 2007, and the second and final increase in October 2008.

Q So what is the current minimum holiday entitlement, and what is it going up to?

A The current entitlement is four weeks’ paid annual leave per year, and obviously a week’s leave will depend on what hours the employee usually works in a week. For full-time employees, four weeks’ leave equates to 20 days. Currently, an employer is legally entitled to offer just 12 days’ holiday entitlement, plus statutory bank holidays, of which there are normally eight in a year. For part-time employees, the entitlements need to be reduced on a pro-rata basis.

Since the introduction of the regulations, there has been much lobbying of the government to increase the minimum entitlement to exclude the statutory bank holidays, so that these are given in addition to the four weeks’ paid leave. In January, the government agreed that the minimum entitlement for full-time staff will increase to 24 days on 1 October this year, increasing to 28 days in October 2008. This equates to an annual entitlement of 4.8 weeks, increasing to 5.6 weeks in 2008. Again, entitlements for part-time workers should be calculated on a pro-rata basis.

Q Do these provisions apply to part-time employees, and how do I calculate bank holiday entitlements for part-time people?

A Yes – all workers are entitled to paid holiday, irrespective of the hours they work. The calculation of bank holiday entitlements for part-time employees has always been a bit of a brain teaser for employers. People tend to get confused where you have two part-time workers, with one working the first half of the week, therefore benefiting from the majority of bank holidays, which fall on Mondays, while the other part-timer works the latter half of the week, and therefore doesn’t get as many bank holidays off work.

In these situations, you need to make sure that each part-time employee is getting the same entitlement to a full-time person, on a pro-rata basis, given the hours that the part-time person works. Legally, there is unlikely to be an issue if two part-time employees are treated differently to each other, but beware of an employee feeling less valued or wanting to make a complaint if they feel they are not being treated fairly. Read more about part-time workers and holiday entitlement.

Q I already offer my employees more than the statutory holiday entitlement. Do I have to do anything else?

A If you currently offer the equivalent of 5.6 weeks’ holiday to your employees, then you don’t need to do anything to increase the level of holiday entitlement, as you are already meeting the new statutory entitlement. If you currently offer more than four weeks, but less than the 5.6 weeks, you will need to increase your entitlement to mirror the statutory minimum level before October 2008. Also, it is worth checking your current holiday provisions to ensure there are no provisions that would be contrary to the regulations.

Q If my employees start taking more time off, it will create real problems in running the business. Can I pay them in lieu of this annual leave?

A No. As the regulations are a health and safety measure, an employer cannot buy someone out of their rights to paid annual leave, and they need to be cautious if seeking to implement any measures that may encourage an employee not to take their paid annual leave. In practical terms, if an employee is happy to agree to some alternative arrangements – for example, where they are unable to use all their holiday entitlement before the end of the holiday year due to work commitments – you could come to some agreement to pay them in lieu, as they are unlikely to object.

Q Do employees have the right to carry over holiday from one year to the next?

A The statutory four-week holiday entitlement may not be carried over to the following holiday year. However,  some or all of the additional 1.6 weeks’ holiday can be to  carried forward, subject to an agreement between the employer and the employee.

In May 2011, the Government launched a consultion on whether the four-week holiday entitlement should also be allowed to be carried over to the next holiday year when a worker is unable to tacke it due to sickness absence. Read more about carrying over holiday leave here.

Q Do my employees still accrue this increased annual leave if they are off sick or on maternity leave?

A The changes to the entitlement of annual leave do not affect an employee’s accrual of leave during periods of absence, and the position on situations such as ill health or maternity leave is well established under legislation and case law. If you are dealing with any ill health or maternity situations, consider taking specific advice, as the rules and regulations in this area can be confusing.

Q If an employee leaves, do I have to pay them in lieu of accrued holiday? What if I have dismissed them for gross misconduct?

A All employees are entitled to be paid in lieu of accrued holiday on termination of employment, irrespective of how that employment ends. As the right to paid holiday is a statutory one, an employee is still entitled to it even if their employment ends by reason of gross misconduct, without notice or payment in lieu. You will need to be careful in calculating the level of accrued holiday if the period over which you are assessing holiday entitlement covers one of the increases.

Thomas Eggar is one of the UK’s leading regional law firms, providing HR professionals with innovative and pre-emptive strategies for dealing with HR issues.

Find more questions and answers on holiday entitlement  and holiday pay here.