Although when you are lying on the beach, the distinction will feel irrelevant, holidays divide generally into two categories in law: contractual and statutory. The Working Time Regulations 1998 (“WTR 1998”) sets down the minimum annual leave provisions for workers. The term “workers” under the WTR is quite a wide definition including not only employees, but also agency workers and freelancers.
There is no continuous service requirement to qualify for paid annual leave. The WTR 1998 do not prevent employers from providing more generous contractual holiday entitlement (see below).
Under the WTR 1998 workers are entitled to:
- Four weeks paid leave each year;
- Payment for untaken statutory leave entitlement on termination of employment.
At present, there is no statutory entitlement to paid leave for public holidays however, the Government is currently consulting on this point which is likely to change in the near future.
Contractual
Contractual holiday entitlement is normally calculated by reference to a single holiday year, which is usually a calendar year, but does not necessarily need to be. The current year method of calculation is most commonly used, whereby holiday accrues evenly throughout the year. Therefore, on joining or leaving employment, holiday entitlement is calculated pro-rata to the period of employment in that holiday year. The current year system has been adopted in the WTR 1998.
Part-time workers are entitled to the same holidays as full time workers, calculated on a pro-rata basis. To ensure that part time workers are not treated less favourably than their full time colleagues, a part time worker should get a pro-rata proportion of full time workers contractual holiday entitlements, including any extra days for bank holidays. For example, if a full time employee has 28 days off as paid leave (including Bank holidays), a part time employee who works three days a week would be entitled to 3/5 of the full time employee’s contractual holiday entitlement. Beware however of giving more holiday to those who work Mondays! The calculations can be complex and should be done each year. Employers should not round down on their calculation of part time worker’s holiday entitlement, as this would constitute less favourable treatment but an employer can provide time off in fractions of time i.e. hours.
It is sensible for employers to have their own holiday policy and for it to be easily accessible. It is important that a holiday policy clearly sets out the various procedures for how the employer manages holiday i.e. who authorises an employee taking holiday, what records are kept, how holiday accrues etc.
The Court of Appeal decision in Inland Revenue v Ainsworth and others (2005) had an important impact on the law regarding employees holiday entitlements, where they are off sick for a considerable part of a holiday year. The Court of Appeal somewhat controversially held that the right to four weeks’ statutory paid holiday in accordance with WTR 1998 does not continue to accrue whilst an employee is absent on long-term sick leave. The decision was based on the rationale that leave cannot be taken by someone who is not at work. In addition, the holiday entitlement under the Regulations was introduced as a health and safety measure (i.e. employees having time away from the pressures of work). If an employee is not at work, he or she cannot derive any benefit from taking leave. You may wish to check your holiday and sickness absence policies to ensure they address the issue of what happens to holiday entitlement if an employee is absent on sick leave for a considerable period of time.
Where an employee is on maternity leave, during Ordinary Maternity Leave (the first 26 weeks), contractual and statutory holiday pay will continue to accrue. During Additional Maternity leave (the second 26 weeks) only statutory entitlement to paid annual leave continues to accrue. Contractual holiday entitlement may also continue to accrue if this is provided for in the employee’s contract.
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