The Ultimate Guide to Holiday Leave and Pay in the UK
17/06/2021
Holiday leave is a globally accepted necessity in most countries, with this requirement being driven by human rights. In the United Kingdom, all employees are entitled to annual leave and must be paid their salary during this time.
No matter whether employees work for an agency, are on zero-hours contracts, or work on a part-time basis, they will be entitled to annual leave.
Employers need to be aware of how much leave their employees should be getting and need to consider how overtime affects staffs’ annual leave allowance.
What Is the Minimum Holiday Entitlement?
Most workers in the UK are entitled to 28 days or 5.6 weeks of paid holiday. Someone is usually defined as a ‘worker’ if they meet the following requirements:
- There is a contract or arrangement in place to complete work for some kind of reward. The contract does not have to be written for it to be recognised in the eyes of the law.
- The previously mentioned reward is in the form of money or a benefit to the employee, such as the promise of future work.
- They have a very limited right to subcontract the work to someone else.
- They must attend work at scheduled times, even if they do not want to.
- The employer is obliged to provide work for them throughout the duration of the signed contract or arrangement.
- The work they are completing is not part of their own limited company, in a situation where the client is actually the ‘employer’.
For many small-to-medium-sized business owners, 28 days holiday can seem like a lot. However, this actually includes bank holidays. In England and Wales, we have 8 annual bank holidays. If an employer requests their workers take leave on these days, then they will be obligated to.
Without bank holidays, most workers are then left with 20 days (or 4 weeks) of annual leave. However, it’s worth noting that employees don’t have to take bank holidays as paid leave.
Employers have the right to ask their staff when to take their annual leave. This can be confirmed on the UK government’s website. Bank holidays are an example of this. It would be best to confirm this in the employment contract, in order to avoid any disputes with workers in the future.
Many businesses close between Christmas and New Year, not due to religious reasons but because lots of suppliers halt trading for this time. If this is the case, then lots of companies will make this a period of required annual leave. In addition to employers asking workers to take their leave at specific times, they can also request when employees don’t take holiday. Businesses use this technique to ensure they always have an appropriate number of staff members at work.
SMEs are advised to do this carefully, so employees don’t run out of days to take their annual leave. Employers will need to find a solution so that employees can take their annual paid leave.
How Much Holiday Must an Employee Take?
When employees are planning when to take their leave and how much they wish to take, they will need to give twice as much notice as the length of time they are taking off. For example, an employee would only have to give two days of notice, if they are requesting one day of leave (unless the employment contract states otherwise). In circumstances such as this, the government recognises that employers may want to ask for a long notice period but ‘within reason'. Due to the nature of some industries, longer notice periods are necessary, especially when shift work is involved.
Employees will need to plan what portion of their leave to use, and the UK government has a great tool you can use. Both employers and employees can use this to work out the total amount of days and holidays and what each employee is entitled to.
Although the legal minimum is 28 days (or 20 + 8 bank holidays), employers may choose to give out extra days of annual leave, which will be stipulated in the contract of employment. Annual leave will be calculated pro-rata for any part-time employees.
For those who are self-employed, as you are your own boss, you can decide how much holiday to take. However, somewhat ironically, business owners tend to have fewer holidays than their employees.
On the other hand, unfortunately, there are employers who are manipulating contracts meant for casual workers. These contracts attempt to classify workers who earn a very low wage as self-employed. Due to this, employers will try to stop workers from taking paid leave, claiming it is in the total being paid across to them. If a situation like this arises, please contact a union rep or the Citizens Advice Bureau, so they can investigate.
Once an employee knows how much leave they have available, they can nominate how many days to take off. Just as employers can restrict when workers take their leave, they also have control over how much is taken at once. For some, this may be defined in the contract or others may need to discuss it with their manager. The manager and employee may need to talk about organisational needs. The more specialised and niche the job, the harder it may be to take a long stretch of leave in one go.
The employer will need to feel satisfied that the worker’s role will be adequately covered for the entire requested leave period.
If a long break is granted, then employees need to make sure to avoid burnout, especially if they work in a pressurised occupation. It might be a good idea to remind employees that whilst a long leave can seem appealing, using up all their annual leave in one go does have disadvantages. They will then need to work solid for 11 months without any time off, which could be very monotonous and tiring.
How Is Holiday Pay Calculated?
Whilst there are many employees who get more than 5.6 weeks paid holiday per year, the large majority of people get 5.6 weeks, and with bank holidays taken away, this adds up to 20 days. Employers and employees can use the UK government’s holiday calculator to work out the amount of paid leave someone is entitled to.
The starting point is the pay-per-week figure, which is calculated based on the kind of work the employee does and how much the employee is paid for these hours. This calculation covers full-time, part-time, term-time, and casual workers.
To find the value of employees' average hourly rate, look over the past year and count the hours worked and the related amount paid for this time. Take the average from these numbers.
The term ‘week’ refers to Sunday to Saturday. Sometimes, a ‘week’ may be interpreted differently, for example, Monday to Sunday, if that is how an employee’s pay is worked out. However, when possible, it is best to stick to standard terminology.
With part-time employees, it can be more difficult to work out the average, as some weeks they may not work at all. Employers can look back at the last 104 weeks, in order to find 52 weeks of paid work. The employer can then calculate the average over those 52 weeks. Therefore, the rate will be based on 52 weeks, where pay was paid.
If it is not possible to find 52 weeks of paid work, even when looking back a further 104 weeks, then the employer will need to use the average pay rate for the full weeks the employer has worked.
When it comes to full time, monthly paid employees, the calculations are a lot easier.
- Work out the average pay for the previous month, by dividing the month’s pay by the month’s total hours worked.
- Multiply the average hourly pay from the above calculation by the number of hours worked in a week, to find the weekly pay.
- Calculate the average weekly pay for the past year and use these figures to find the average week’s pay.
Is Holiday Pay the Same Rate as Normal Pay?
Holiday pay is usually the same rate as an employee’s normal pay. For example, employees who are paid monthly will then have their annual salary divided into 12 equal and monthly payments and when they take holiday, it will have no effect on their payslip.
The UK courts have decided that guaranteed and non-guaranteed overtime should be considered when working out holiday pay.
The Court of Appeal in Northern Ireland has determined that if voluntary overtime becomes part of an employee’s ‘normal working week’, this will need to be considered when calculating holiday pay.
Special payments will also apply when employees have varying pay rates, such as piece work. If this is the case, then the holiday pay will be the average rate paid for work over the previous 12 weeks.
If the employee didn’t work for a week, then this should be replaced with the last week in which work occurred, until you have twelve weeks of paid work.
Rolled-up holiday pay is unlawful, as employers cannot withhold payment to employees on holiday and replace it with holiday pay “rolled up” into the hourly rate of pay.
The Employment Appeal Tribunal (EAT) court has ruled that holiday pay must reflect non-guaranteed overtime. This is when overtime is worked due to employers asking employees to do so. In this case, overtime payment values must be calculated into their holiday pay as if it is a ‘settled pattern of work’. The Employment Appeal Tribunal has also stated that holiday pay calculations are much wider than basic pay.
Unfortunately, overtime and holiday entitlement vary due to many different scenarios. Head of employment law at MLP law, Karen Bexley, has indicated that in cases where there is no settled pattern of work, or payment variables, such as commission or overtime, then the court will probably favour a standard 12-week reference period.
How Long Do You Need to Work to Get Holiday Pay?
Now that the rates have been discussed, the next step is to consider how to earn time off.
An employee’s annual leave begins the moment they start their job. It is the employer’s responsibility to inform the employees of the dates of their statutory “leave year” in their contract of employment.
The leave year might either be from 01 Jan to 31 Jan or could be connected to the employee’s contract year. For example, from 01 October to 30 December.
It’s worth noting that holiday entitlement and leave years are not affected in any way by maternity, paternity, or adoption leave. Annual leave is still accumulated over these periods.
If an employee starts work part-way through a company “leave year”, only a pro-rata portion of their total annual leave may be used in the current leave year.
How Many Holidays Do You Accumulate Per Month?
In general, employers use an accrual system to work out the annual paid leave for their employees. Essentially, each month a worker will get one-twelfth of their leave accrued to their holiday leave balance.
Each contract of employment will state how many days’ leave can carry over into the next leave year. For example, if an employee is entitled to 28 days’ annual leave, then they will usually be allowed a maximum of 8 days to be carried over into the next leave year.
Untaken leave can even be carried over for the next two years if there was a reason for the employee to be unable to take leave.
If an employee was able to take leave but chose not to, then the standard rules still apply.
Related Guides
And that’s it! We hope you’ve learnt everything you need to know about holiday leave and pay in the UK.
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