Holiday entitlement and pay


Andrea Nicholls, AN LAW solicitors Last Modified  04 March 2016

This section concentrates on holiday entitlement and holiday pay under employment legislation and also the statutory rights of employees and workers under the Working Time (Amendment) Regulations 2007, which came into effect on 1 April 2009. Both employees and workers are covered by this legislation.

On 8 January 2015 the Deduction from Wages (Limitation) Regulations 2014 came into force limiting claims for back pay of incorrectly calculated holiday pay to two years following the EAT decision in Bear Scotland v Fulton. The regulations apply to claims for holiday back pay presented to a tribunal on or after 1 July 2015 (see 'In-depth' section regarding the impact of the regulations on holiday entitlement above 20 days per year).

Key points

  • The minimum statutory requirement for a full time employee is 28 days or 5.6 weeks including public holidays
  • Full-time workers annual holiday entitlement normally accrues at 2.33 days per month from the first day of employment
  • Part-time workers are also entitled to a minimum of 5.6 weeks of paid holiday each year, calculated on a pro-rata basis, according to the hours they work.
  • Contracts of employment may stipulate whether all public holidays or only particular bank holidays are included in their annual entitlement
  • Taking unauthorised annual holiday may lead to disciplinary action being taken by the employer
  • In addition to the statutory minimum holiday entitlement an organisation may adopt the use of a time-in-lieu or flexi-time system and/or the use of unpaid holiday entitlement in addition to paid holiday entitlement
  • The law has changed significantly in respect of the calculation of holiday pay so that now regular overtime and commission payments may need to be included (see 'In-depth' section).

Recent developments

Case law changing holiday pay calculations
In Bear Scotland v Fulton, the EAT decided that non-guaranteed overtime pay should be included in the calculation where it is part of “normal remuneration” and that a gap of more than three months broke a series of holiday pay underpayments (this is relevant for backdating claims).

Other cases, such as Lock v British Gas and Williams v British Airways have established that regular commission payments and allowances “intrinsically linked” to performing a role (such as flying time for pilots), should also be included when calculating holiday pay. The Lock v British Gas case returned to a tribunal, following a CJEU ruling and has since been appealed to the EAT. In February 2016 the EAT confirmed that the Working Time Regulations 1998 should be interpreted to correspond to the EU working time directive and that holiday pay should include commission. However, uncertainty remains over how to calculate this. The case is now likely to go to the Court of Appeal.

Note that any claims for holiday pay dating from 1 July 2015 onwards are capped at two years' back pay (see 'Holiday entitlement and pay' in-depth 'New legislation').