It’s that time of year again, when staff are thinking about planning holidays and putting in requests for time off.

Given the variety of employment terms and conditions firms these days must adhere to, it’s understandable that there may still be confusion on what Employers can, and can’t do, when to it comes to holidays. Issues such as:

• Are part-timers entitled to the same number of holidays?
• Can we insist that employees take holidays when we want them to take them?
• How do you calculate holiday pay for an employee on a zero hours contract?
• Can an employee just decide that they are taking a holiday without notice (or even with notice but without our consent)?

Here our Expert gives the answers to some of the most frequently asked questions on holiday pay.

What is the Minimum requirement?

ALL ‘workers’ are entitled to a minimum of 5.6 weeks paid holiday in a complete year. For full time workers working 5 or 6 days per week this equates to 28 days per annum.

Then the questions arise:

How does this apply to Public and Bank Holidays?

There is nothing in employment law that requires employers to give staff time off for public and bank holidays.  Most employers choose to do so, however. The current 8 days may be incorporated within the 28 days, or in addition. Bank and Public holidays may be defined as normal work days or the time given off as part of the employee’s entitlement. Either is acceptable but make sure your contractual terms and conditions reflect the business’ needs in this respect.

How should part-time employees’ entitlement be calculated?

The simplest calculation is to divide 28 by 5 and multiply by the number of days the employee actually works. So, an employee working 3 days per week is entitled to 16.8 days (This may be rounded up but not down or even kept as a fraction).

The follow up question to this is invariably concerning bank holidays. “But they don’t work on days that are normally bank holidays”. The answer is that it doesn’t matter if they work bank holidays or not – you can apply the full entitlement (as shown above) in any way that you feel is fair and lawful.  It would be unusual for an employee not to encounter some bank holidays occurring on one of their work days (and this may be determined at the start of each year) but if not, then their full entitlement is taken at other times.

How do you calculate entitlement for employees with variable hours or on zero hours contracts?

This can get employers into an almighty tangle.  However, there is a simple solution.  If the 28 days entitlement is calculated as a percentage of a full-time employee’s annual work days, it equates to 12.07%. So, all that needs to be done is to maintain a running total of employees work hours and multiply them by this percentage when holidays are being calculated.  E.g. last 8 weeks work hours – 120 x 12.07% = 14.5 hours holiday accrued.

What do you include in holiday pay?

This has changed hugely over the last couple of years. Previously, the majority of employees would have received their “normal” pay when on holiday i.e. basic pay without any overtime, bonuses or commission.

But these elements have now been included and need to be paid.

What overtime and other payments must be included in holiday pay?

Well unfortunately the water is still a bit muddy on this one as there have been a number of Tribunal cases with slightly different interpretations. So we have to wait until there is a definitive judgement.  In the meantime, all overtime should be included as an average where it’s genuinely rare to work overtime, (ACAS state it need not be paid where it is “genuinely occasional and on an infrequent basis”). Similarly with bonuses and commission, an average must be included.

The court rulings covering overtime, bonuses and commissions strangely (to the common man/woman) only apply to the first 4 weeks in any year and there is no guidance on over what period averages should be calculated. However, for the former – most employers apply it to the 5.6 weeks for convenience. And, for the latter, it is generally accepted that 12 weeks is the period most suitable.

Who decides when holidays are taken?

This rests squarely with the employer.

The employer can refuse holiday requests providing refusals are not unreasonably applied and disciplinary action can be taken against employees who take holiday without consent or after consent has been refused. Either party needs to give notice at least equivalent to twice the period of the holiday requested, although employers my have their own rules in this respect.

The employer may specify certain times of the year when part of the entitlement must be used (usually for annual shut-downs).

However, employers need to be aware that refusal to grant time off to observe religious holidays could result in indirect religious discrimination.

Can employees be paid in lieu of holidays and/or carry them over to the following year?

Under normal circumstances the basis 28-day entitlement may not be carried over and if the employee fails to request and take them, they are then “lost” to the employee. However, any entitlement given in addition may be subject to the organisation’s own rules in this regard.

Otherwise there are two exceptions:

Maternity Leave.  Employees on maternity leave cannot take holidays during their leave without ending the maternity leave so any accrued entitlement, prior to and during the leave period, may be carried forward and taken by agreement upon their return/end of leave.

Illness.  An employee who is prevented from taking holiday due to illness is automatically allowed to carry this forward (maximum 4 weeks in each year) but may also come off sick leave – take their holiday – then return to sick leave. They cannot move this forward indefinitely and any carry forward may be limited, so it must be taken within 18 months of the end of the relevant holiday year.